Our analysis of Japanese and U.S. employment and wage systems has identified the aspects of the Japanese system that have supported relatively high growth, low inflation, and an equitable distribution of income while maintaining high international competitiveness. However, Japan's superior performance in these areas has been accompanied by large social costs including strict gender roles, long working hours for men, limited time for family and vacation, and few opportunities for workers to improve their labor market position after early adulthood. In response to heightened international competition, especially from Japan, U.S. firms adopted several Japanese employment practices while tailoring adaptation of these policies to U.S. labor market institutions.
The comparison of Japan and the United States demonstrates that overall economic performance is not determined by either firm employment systems or national economic institutions. Firm practices, which affect a single company's competitiveness, can support or constrain a country's ability to achieve its economic goals, but the firms' practices cannot themselves determine a country's economic performance.
Within Japan, the economic slowdown of the 1990s called into question the durability of the Japanese security-based employment systems, and Japanese employers looked to U.S. companies for lessons in improving labor market mobility. However, we find that the business sector carried the burden of the recession, and the employment system in large and mid-sized Japanese companies along with the Shunto wage-setting process minimized the impact of the recession on income and