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'Abenomics' may result in more workers getting fired

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What politicians say today might change radically soon afterwards. Take Prime Minister Shinzo Abe, who published an article outlining his political visions in last December's monthly Bungei Shunju magazine.

In it, recalls Shukan Asahi Geino (May 23), Abe remarked, "We shall continue to put emphasis on an economy open to free competition; but rather than the type of capitalism motivated by greed, like that by which Wall Street swept over the world, there is a form market-based formula, which that places importance on reason and knows the way to true prosperity, which is most suitable for our 'land of ripe rice ears' (i.e., Japan)."

Three months later, at the fourth meeting of his "Industry Competitiveness Discussion Group" held on March 15, attendants received a stack of materials that contained this statement: "The present state of major companies is that a 'surplus of human resources' has become apparent. . . In order for the rules for dismissal in (Japan's) employment-retaining system to be changed to the worker mobility rules that are matched to the world's standard. . . including final monetary settlements, worker dismissal procedures in the labor contract laws will be clearly established."

Whoa, says the magazine -- this is about "liberalization of firing workers." So much for "market-based capitalism that emphasizing the principle of reason and seeking true prosperity in a way that befits Japan." Is calling one's compatriots "surplus" and making it easy to fire them the real face of Abenomics?

"This doesn't mean the prime minister really believes in 'ripe rice ear's style capitalism," says an influential member of the LDP. "But by taking the reins of political power, it is possible to improve the economic situation, and he has confidence that he can accomplish this. But to do that, he has to boost the economy and improve employment, and to achieve his scenario involves laying down a smokescreen in front of the opposition and the citizens."

Of the so-called "three arrows" of Abenomics, it is known that the first two have already succeeded. The bank of Japan has vowed to halt deflation, and a huge budget has been approved, sending the stock market soaring and the value of the Japanese yen diving.

The third arrow is concerned with growth strategies. The Trans-Pacific Partners (TPP) free trade agreements and other market liberalization measures may pave the way for a new economic environment, but not necessarily one full of promises for workers.

Tadashi Yanai, CEO of Fast Retailing, remarked in an interview with the Asahi Shimbun that he sought to standardize company staff wages on a global scale.

"The main point of the global economy is that Japanese workers will no longer be forced to compete on the basis of wages with people in developing countries," explains a veteran Diet member with close ties to M. Abe.

The means by which the "surplus" will be swept away is through a proposed law to enable creation of 'jun-shain,' or semi-regular staff.

The aforementioned Diet member thinks one form this will take will be the dismissal of large numbers of staff in manufacturing firms, who will flow to jobs in the service sector.

"This will lead to expanded employment," he says, "but wages will shrink. People are worried the proposed law will have the impact of a megaton-class bomb on the economy."

One way this is likely to happen is for only 20% of the workers at any given company still holding the status of "regular staff member," with the other 80% relegated to what is effectively conditions of part-time workers. Their hourly pay will fall to the equivalent of 800 yen, bringing them annual compensation of around 1 million yen.

When things drop to this level, he asks, will Japanese workers who labor for those low wage levels still be able to complete with workers from developing countries?

If the proposed law is passed, Asahi Geino feels Japan will become a dog-eat-dog society in which the wealthy reap the benefits while the middle class eventually disappears.

It's clear that the heady Abenomics on which so many have placed their hopes may be destined to be remembered as "Dame (no good) -nomics."

© Japan Today

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46 Comments
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Start a business, pay what the law says you must. Try to make a profit I fkn dare you. If all regs and payroll taxes, consumption taxes, social insurance, health ins urence, employee tax, to name a few, let alone personal taxes, many industries find it impossible. Then blame small business. Open your eyes, big business eats your tax. This is a failing economy because of recalcitrant politicians, inherent corruption and public indifference to blatantly compromised fiscal and social policy.

0 ( +0 / -0 )

this regime better have a Plan B in place

They already have a Plan B , raise taxes.

0 ( +0 / -0 )

If only the do-less oyajis (middle aged guys) would get fired. Those who have become executives not because of any particular ability, but by which university they graduated, by connection, or by years of service.

In fact, if these guys were moved out of their high/middle positions in government, local government and industry and replaced with active people who can actually get a job done, the economy would improve over night.

Ah. We can but dream!

1 ( +1 / -0 )

This whole Abenomics is supposed to create more easing so corporate will HIRE more people or RAISE salary in order to stimulate consumption. That's one of the key element in order for this policy to succeed.

If the adverse effect is taking place, then this regime better have a Plan B in place. Increasing all these gov't spending and lowering the currency must lead to more jobs and consumption. If neither are taking place, Plan B or jump ship now.

0 ( +1 / -1 )

All these labour market changes are occuring already and have been for some time. The legal changes Abe is talking about are simply to remove the irritatation of the occasional individual or unionised workplace successfully suing over flagrant labor law transgressions that are routine at the moment. Therefore the likely economic effect of this initiative over and above what is already occuring will not be great. It is more a question of moral support.

0 ( +0 / -0 )

It's a dumb premise. The prime minister can't provide real sustained jobs. That's up to the private sector. The PM can offer the juice, but its up to the employers to drink it. And there's been an unprecedented amount of juice lately.

If you've got an issue with joblessness, then blame the employers, not the government.

0 ( +1 / -1 )

“The main point of the global economy is that Japanese workers will no longer be forced to compete on the basis of wages with people in developing countries,” explains a veteran Diet member with close ties to M. Abe.

So,what is a global economy if not competition that drives down wages and product prices? Japan, being export orientated has benefitted from global markets. And when wages got too high here production was outsourced benefiting the companies whilst Japanese workers were laid off.

Unless there is a sudden quantum leap in Japanese technology within Japan that allows for the production of specialized high end products then Japanese workers will find that they areproducing the same products as the rest of Asia, earning an average of a million yen a year and paying half of it to the government to support their graying population......

0 ( +1 / -1 )

Though I am against TPP, it does seem inevitable since one of my main issues is to make things cheaper to buy.

I'm not optimistic about that, they will figure out how to fix the prices anyway.

1 ( +1 / -0 )

@malfupete

A nation needs to have a manufacturing base...

Think about it, while I would agree with you if you were talking about a number of other nations, it doesn't apply to Japan. It's a lot more economical to build your manufacturing where the resources are, if your nation has none. There is kind of a brotherhood, IMO, here, with stronger bonds than say the US.

Though I am against TPP, it does seem inevitable since one of my main issues is to make things cheaper to buy. Toured Hokkaido for 10 days last summer in a camp car. Would hate to see all those wonderful farmers go out of business. But I also do see a lot of waste in the work force.

And the nightmare "monster in the closet", Fukushima Daiichi.

1 ( +1 / -0 )

tmarieMay. 30, 2013 - 02:06PM JST The whole problem with Japan is the fact that they are not having kids at all. I disagree. I think a lot of people want to have kids but a) can't afford them and b) women don't want to give up their career

Yes, there are alot of women in Japan who do not want to give up their career and have kids. Japan's population will fall from 128 million to 116 million by 2030 and to 85 million by 2060.

0 ( +1 / -1 )

A nation needs to have a manufacturing base... if not, then you're sending all your cash to china to buy the goods made there and fund their public systems rather than at home, but that's beside the point.

The japanese employment system is so broken that it needs a super shock to bring it into the 21st century. But firing all these workers does not mean they will be able to find meaningful employment later on.. not everyone wants to work in the so-called "service field"

3 ( +3 / -0 )

@Yubaru

Besides the physical steps he has taken, he is also playing a psychological game and it seems to be paying off, albeit with bad effects for some sectors, as we can see from the protests.

He's a popular figure and I guess a lot of people have been ready to listen, especially when the previous PM did not appear to be doing much. As for the politics, who care? People are slamming the current PM no matter which party they belong to.

Abe has provided optimism and it's a powerful force.

-1 ( +4 / -5 )

Yubaru, yes, I realise that but I also know that many companies refuse to pay the legal requirement and get away with it - hence the comment.

No, not all have promotion based on age but many do. Do I need to point out exception to this? Many to most companies here have automatic promotion based on age regardless of work done. I shouldn't have to tell you such things.

1 ( +3 / -2 )

Get these ID numbers out and demand that companies pay the pensions and health care they are suppose to pay.

You do realize that it isnt the companies that pay pensions to retired employees. If the company is not paying health care they are against the law too.

Get rid of automatic promotion based on age and gender.

Gender based promotion is limited to one gender for the most part, and not all companies have automatic promotion based upon age either.

-1 ( +1 / -2 )

The whole problem with Japan is the fact that they are not having kids at all.

I disagree. I think a lot of people want to have kids but a) can't afford them and b) women don't want to give up their career

Japan is overstaffed by old guys who do nothing but boss and bully the younger guys around. Make it easier to fire these guys but demand that companies have a certain percent of employees that are FT. Get these ID numbers out and demand that companies pay the pensions and health care they are suppose to pay. Stop allowing staff to abuse overtime in order to get more money. Start firing people that don't pull their weight and promote people who do. Get rid of automatic promotion based on age and gender. And stop hiring people for useless jobs like elevator women and greeting staff!

0 ( +5 / -5 )

@Reformed.....Learn something everyday, thank you. So then that would mean that the PM doesnt believe in Japanese style capitalism is what the minister is inferring in this statement right?

This doesn’t mean the prime minister really believes in ‘ripe rice ear’s style capitalism,” says an influential member of the LDP.

1 ( +2 / -1 )

Its annoying that Japanese companies refuse to fire useless workers

Seen just as many useless workers back home as here. Try reading Dilbert sometime - it's a good reflection of how things really are. Problem is, some of you have been in Japan too long to realize that management back home has become more and more ridiculous. In Japan, it has generally become more flexible, depending on the company of course. Because the changes are gradual, you don't notice them at first.

2 ( +5 / -3 )

There is a lot of over-employment here, and a lot more unemployment than is ever reported. Japanese women need to be more involved in the labour market, rather than Japan opening up to immigration. Japan's basic problem with the labout force is inefficiency in the domestic market, but the management structure means that this will never change. Japan will not become a meritocracy anytime soon, but it should be a bit easier for companies to get rid of useless workers than it is at present. Japanese companies don't seem to train staff either, or they allow staff training to be conducted by inefficient predecessors, which continues the cycle of inefficiiency. Many Japanese seem to admire useless endeavour, whereas the west admires ruthless efficiency. A "good worker" here is usually someone who is prepared to spend 12-14 hours performing a simple task, but overseas such workers would be judged useless and dismissed. The twain doesn't meet.

3 ( +5 / -2 )

@Yubaru

Jack Seward wrote a piece about Japan being the land of ripe rice ears in one of his books. (Mizuho-no-kuni) It is an old name for Japan.

http://en.wikipedia.org/wiki/Names_of_Japan

1 ( +2 / -1 )

Its annoying that Japanese companies refuse to fire useless workers, while their overseas subsidiaries are forced to do so. At my previous company our US subsidiary had to let go of half of its employees, and our Chinese subsidiary got dismantled entirely. But meanwhile we kept letting in new Japanese graduates in the hopes that they will become a useful employee some day, while letting existing employees sleep at their desks and collect overtime pay for dragging out simple assignments.

6 ( +6 / -0 )

Japan would rather starve then to improve immigration policy for foreigners who wants to live and work in Japan

Hogwash. Conditions for foreigners have improved significantly.

1 ( +4 / -4 )

At least Abe is doing something. Good or no good, critics will always have something negative to say. Lifetime employment does help in family stability among other important areas. At least it keeps the population stable, in terms of people are less worried and stressed about money and future. You can't compare Japan and USA in terms of opportunities, output, land, resources etc. And the western model of development is very misleading, though a lot would argue because they want to. Most western countries are heavily indebted, that includes states. Only that they don't reveal the real statistics. I do respect Japanese people, in the fact that they do anything to survive and make a living. The funny part is those who normally tell people to go and enjoy life and stop worrying can't even do it themselves. Simply because someone has money and savings doesn't mean they should spend it. It is good to respect people for their handwork, and not judge them as fools.

0 ( +2 / -2 )

We (and Abe) should remember that, while there are plenty of unproductive workers at Japanese companies, making it easier to lay them off is only half the answer. The other half is about work processes. If you keep the same inefficient "must stick to these procedures come hell or high water whatever the outcome and the parameters of the project" at the same time as you reduce the number of workers, you will only increase instances of karoshi and the number of kids who never see their parents.

Yes, firing the slackers will reduce labor costs for companies. But the real key to corporate growth that you can turn into expansion and added employment lies in making sure that people work efficiently, with focus on results rather than processes. And there Japan has a long long way to go.

6 ( +6 / -0 )

@Yubaru : Very true, the inheritence tax is such a disincentive to pass on wealth as well as even to make personal investments.

0 ( +1 / -1 )

Abenomics will make decrease japanese savings value . i hope japanese people will wake up and stop to just focus on work work work, bonus bonus bonus and start enjoying life while they get something for their money. the only way to get out of the massive debt is to print huge amounts of cash and make savings worthless.

-2 ( +0 / -2 )

I am not sure this is such a big issue as most workers are not seishain now anyways, and are hakken shain. In addition, I think it is not so hard to fire seishain either if you pay 6 months severance. The companies avoid it mainly for bad PR.

0 ( +0 / -0 )

dcog, sorry, what I should have written is it's becoming more like the American economy where the rich get richer and the poor get shafted. But in the end the rich here get nailed just as badly as the poor because of the taxes people who inherit have to pay.

0 ( +2 / -2 )

Because in the long run it means a heck of a lot more money for the government. With estate taxes and the entire social welfare system here sitting on the brink of disaster, the government has to find new ways to create income for itself to function.

@Yubaru : That's completely opposite actually, especially seeing that US government revenue is sitting around 15% of GDP, a pitiful amount compared to European countries. If they wanted higher income for the government relative to GDP, then you would need to move in the direction of France or the Nordic economies, meaning a less "flexible" labour market, more protections for citizens and less income inequality.

Thankfully, like Europe, Japan would never move in the direction of the US labour market and willfully create mind blowing income inequality and put a third of the population on food stamps.

1 ( +2 / -1 )

Almost certainly. Habve to wonder though if the "efficient labour markets" that prevail in US and - to some extent - in EU and result in unemployment ranging from 7.5% through to 28% are better than the inefficient ones that we have in Japan and that have meant consisten sub 5% unemployment, even in the depths of the "lost decades".

It's simple math. Employees in an efficient labor market are more productive and those who can't do the job aren't on the payroll. In Japan when a company is in trouble, salaries are cut(I personally have experienced that) for everyone even if the company is overstaffed. Instead of letting go 10% of the workforce, everybody suffers. This is why unemployment stays at 5%. If you're one of the oji-sans doing nothing, great for you, if you're one of the ones actually working, you have to suffer for others.

-1 ( +3 / -4 )

sangetsu03 May. 30, 2013 - 10:01AM JST What we are looking at here is simply supply and demand. The supply of workers is too high, the demand for their services is too low. If there is no demand, then there needn't be any supply.

Well, what caused that in Japan? In the past two decades, just like most of the major companies in the U.S., the manufacturing has left Japan. The head of these companies get rewarded for the bottom line, and the only way they might have better chance for survival is to manufacture overseas. You don't need as many people doing the R/D, service and marketing organization in Japan. In order for Japanese companies to be competitive, they have to follow most of their competitors in manufacturing overseas and reduce the corporate tax. These companies can keep the earned money overseas as long as they don't transfer money back to Tokyo.

1 ( +2 / -1 )

Manufacturing is the backbone of a nation. send it overseas and instead create a service economy at home and youll be going downhill in no time. As I said before, dont expect corporations and governments to help you. Its not their job, they want revenue (government shouldnt be a business) so you the individual aren`t worth too much them. It is the community as a whole that has failed by letting these thugs run your life. Stay out of the TPP. Prices might go down but so will wages, cost of living will go up, greed will be more than ever out of control.

1 ( +4 / -4 )

Would you rather the company convert the employees to full time status?

That is not a fair question, PT workers serve a purpose for companies, and there are PT workers who do not want to be full-time either. But you knew that before you asked the question. How about this, why don't you be a PT worker and find out how it feels, and not just for a day, or a week, but for years, and years, and years. See how you would like it and then come back and talk here about your "experience" with it. Your eyes will open.

The title PT is also a misnomer because many if not most of those PT workers, do more, work harder, earn more money for their companies or businesses than many FT workers do. Many would love to be FT but can pass a stupid entrance/employment "test" that companies give. Who then hire some dude who can study for a test but knows absolutely nothing about how to work for a living.

If the "firing" practices are going to change, then hiring one's must change as well, the two go hand in hand.

4 ( +7 / -3 )

Nothing has caused more heartache, poverty and death than an unholy alliance between business and government.

Any time you hear a politician talking about some plan to create wealth, run the other way.

Especially if they're using phrases like "rice eared whatever."

8 ( +10 / -2 )

I think most people don't have even a basic understanding of economics, probabaly because it is as complicated as walking and chewing gum at the same time.

What we are looking at here is simply supply and demand. The supply of workers is too high, the demand for their services is too low. If there is no demand, then there needn't be any supply. In nature the supply always adjusts to meet the demand, or vice-versa, in the end there is a balance of sorts. If a company wishes to continue paying for large numbers of workers when there is no demand for what they produce, the entire company will fail, and all of the workers will lose their jobs.

4 ( +8 / -4 )

Almost certainly. Habve to wonder though if the "efficient labour markets" that prevail in US and - to some extent - in EU and result in unemployment ranging from 7.5% through to 28% are better than the inefficient ones that we have in Japan and that have meant consisten sub 5% unemployment, even in the depths of the "lost decades".

4 ( +6 / -2 )

Yes, Japanese companies are overstaffed. Few traditional companies have earned a profit in the past decade, and the giants like Panasonic and Sharp have been losing vast amounts of money on a nealry daily basis. Some companies have reduced staff to reduce costs, as Sony did early in the year.

Japanese companies have been reluctant to reduce staff, they have an admirable attachment to their workers. But this has kept costs high. The two largest expenses a company has is taxes and payroll, usually in that order. Japanese companies also have the added burden of having to make debt payments, as nearly all of the big companies have been making ends meet by borrowing. To help with the problem, the corporate tax rate in Japan was relaxed (it was among the highest corporate tax rates in the world), and hiring has been reduced. Of course, the current staff must still be paid, but many have had to take cuts in pay or hours. This is one of the reasons the average pay rate in Japan has been decreasing.

Japan will likely not recover. The government has far too much debt, and with a shrinking economy, even servicing the debt is difficult. With revenue decreasing due to a shrinking population, and foreign competetion beating out the country's largest taxpayers and revenue generators, there is not much which Abe or anyone else can do.

His "third arrow" of reducing regulation had better be shot hard and on-target.

4 ( +5 / -1 )

UpgrayeddMay. 30, 2013 - 09:07AM JST Would you rather the company convert the employees to full time status?

Every successful company needs balance. If you only have 25 PT workers and maybe few FT workers, the companies that follow this strategy will end up with the workforce they deserve. For long term, they'll find that by not valuing employees, they will get employees who don't value the customers. It's bad business.

2 ( +4 / -2 )

Would you rather the company convert the employees to full time status?

Let's say a company had 25 PT workers and the government told them to convert the status of all of them to FT status. Let's assume that the company cannot increase labor costs because of a bad economic situation. Would they not then fire a good chunk of those PT workers and only convert a small percentage of the highest performers to FT status? Would that not result in increased unemployment? Is that truly a better situation for the workers?

0 ( +3 / -3 )

Anyone who has worked at a JP manufacturer will agree that the country is in dire need of less stringent dismissal restrictions. For every talented and efficient worker, there are 2 or 3 who are content to look at Yahoo all day and do nothing. The level of job security here is abnormal - if you're concerned for your own job while reading this, work harder and earn your dough instead of reading JT all day!

8 ( +9 / -1 )

In my industry (tech) - the opposite is true - the technical specialists on short term contracts get paid much more than their seishain bosses. They just don't get the bonuses or the job security.

Maybe for yours, but I can tell you from experience that there are plenty of other sectors where the "contracted" employees make markedly less money, have zero bonuses, and no job security what-so-ever, and work in difficult environments. But they do the jobs, because there are no other options.

10 ( +12 / -2 )

One way this is likely to happen is for only 20% of the workers at any given company still holding the status of “regular staff member,” with the other 80% relegated to what is effectively conditions of part-time workers. Their hourly pay will fall to the equivalent of 800 yen, bringing them annual compensation of around 1 million yen.

Well this paragraph is just nonsense.

In my industry (tech) - the opposite is true - the technical specialists on short term contracts get paid much more than their seishain bosses. They just don't get the bonuses or the job security.

-4 ( +2 / -6 )

The whole problem with Japan is the fact that they are not having kids at all. Japan would rather starve then to improve immigration policy for foreigners who wants to live and work in Japan.

1 ( +4 / -3 )

Why Japan thinks it should be modelling its economy and employment structure after the U.S. escapes me.

Because in the long run it means a heck of a lot more money for the government. With estate taxes and the entire social welfare system here sitting on the brink of disaster, the government has to find new ways to create income for itself to function.

There are no 3rd generation rich in Japan. Not really.

-3 ( +3 / -7 )

Yeah, look at the U.S., where a "flexible job market" has driven people farther and farther down the wage scale into increasingly menial jobs, and where the six Walton heirs alone hold more assets than the entire bottom 30% of the population. Why Japan thinks it should be modelling its economy and employment structure after the U.S. escapes me.

16 ( +19 / -3 )

“This doesn’t mean the prime minister really believes in ‘ripe rice ear’s style capitalism,” says an influential member of the LDP.

What the heck is "ripe rice ear's style capitalism"? Even "google" didn't know?!?!

3 ( +4 / -1 )

Lifetime employment and strict labor laws have been killing Japan for the last 20 years. Working for the same company for years might have been possible in the old days but in this age of global competition the labor market must be flexible. Having worked in a Japanese company, I have seen workers do nothing for years without ever being fired or getting a pay cut. Usually the company have a rule regarding retirement at age 60, once a worker reaches this age he/she is automatically forced to retire after sucking the life out the company for 20 years. Look at the US, Canada where there's is a flexible job market, not everybody makes 800 (8$)yen an hour. The consequence of an inflexible job market is discrimination. Must be less than 35, no women, no foreigners, no gay, must not have changed jobs more than once etc. I am sure the oji-sans who spend their entire day doing nothing at their desk will roll out the propaganda machine in full force if there's talk of modernizing the Japanese labor laws.

9 ( +13 / -4 )

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