Temp Nation: The demise of "lifetime employment" in Japan

Editor's note: Temp Nation is a four-part series on the structural changes taking place in Japan, the world's second-largest economy. With the demise of Japan, Inc.'s lifetime employment policies, more than a third of the country's workforce is now underworked and underpaid. This series examines how some temps are starting to fight back. It also investigates the impact on foreign workers, and the political response to this growing social and economic problem.

NAGOYA, Japan —  For decades, Japan's big firms were famous for their deal with employees: The corporation was a big family that looked after its workers for life. In return it expected total dedication.

That was the Japanese way, and part of the popular 1980s American media narrative on the rise of Japan, Inc.

It's no longer true. Instead, more than 17 million people in the world's second largest economy are now "irregular" workers, or temps, according to government statistics

That's nearly 34 percent of the workforce, up from 25 percent in 1999 and just 15 percent in 1984.

Such workers give Japanese firms a more flexible workforce, helping them keep down costs and cope with globalization. But temps are paid less than full-timers, have fewer benefits and are cast off when times are tough.

The global downturn of 2008 made that painfully clear.

From the last quarter of 2008 to the autumn of 2009, Japan shed 440,000 "dispatch" worker jobs, according to government numbers (some have since been re-hired, or shifted to other categories of temp work.) Temps living in company-provided housing lost not only their jobs but their homes, too.

Now, fed-up temps — as well as small, independent unions — are beginning to push back. They say big Japanese firms are exploiting loopholes and weak enforcement of labor laws to maintain a low-cost workforce of "permatemps" with little or no job security. And increasingly, they're taking their cases to labor bureaus and courts.

Many such workers are surprisingly sympathetic to the need for Japanese firms to stay competitive. They just think things have gone too far.

"It's necessary to limit workers' rights to some extent so that companies can stay in business," said one 45-year-old former dispatch worker at Panasonic Ecosystems outside Nagoya. "The problem is, companies are ignoring the law and using dispatch workers indefinitely."

The worker did not want his name used because he is suing Panasonic for compensation after being let go in 2009, but still lives and works in a community of loyal Panasonic full-timers.

In interviews here in central Japan's manufacturing heartland, he and other former dispatch workers and union leaders described factories where hiring schemes have created something akin to a caste system.

At the top are permanent employees — two-thirds of the workforce — who still have the old, stereotypical deal of mutual loyalty with their companies.

The other third are temps, of bewildering variety. There are part-timers, hired directly by the firm but typically working other odd jobs to get by.

There are "dispatch" workers, who make as little as half the salary of permanent employees for the same work and hours. There are "subcontract" workers, who can only take instructions from the subcontract firm, not from bosses or colleagues at their actual workplace. There are Brazilian and Peruvian workers of Japanese descent, who get paid even less.

And, at the bottom, there are Chinese, Vietnamese and other foreign "trainees," who can make as little as 300 yen (about $3.25) an hour. They pay huge sums to labor brokers to work in Japan, aren't covered by labor laws in their first year of work, and suffer harsh financial penalties if they quit before their contracts are up.

The temp trend even affects foreign English teachers, who have watched firms slash salaries and benefits in the name of cost-cutting.

Broad effects

The implications of a rising temp workforce go far beyond Japan's factory floors. The trend has contributed to lower consumption, sharper inequality, falling wages and a resulting "working poor" problem. Average wages in Japan fell nearly 4 percent in 2009, the third straight year of losses, with real wages (accounting for deflation) falling nearly 3 percent.

The temp trend is also a factor in lower marriage and childbirth rates, since temps with no job security are unattractive mates. The marriage rate was 5.8 per 1,000 people in 2008, down from more than 10 per 1,000 people in the early 1970s.

And the trend has increased pressure on full time, permanent workers, who have to take up the slack in workplaces filled with low-morale temps who have little incentive to work hard.

"Increased use of non-regular workers often creates heavier workloads for the remaining workers, who are expected to make up any shortfalls without concern for time," wrote Osaka-based sociologists Charles Weathers and Scott North in a recent article.

The 2007 Japanese Lifestyle White Paper survey found that 67 percent of regular workers believed their job burdens and responsibilities were much greater than five years before.

How Japan got here

Japan's stratified labor market didn't happen overnight, or by accident.

Until the 1980s "indirect" employment, or employment through a third party such as a dispatch firm, was illegal. In response to business pressure, the government began relaxing hiring rules. Deregulation continued after Japan's economy went into a tailspin and entered its "lost decade," then accelerated under pro-business prime minister Junichiro Koizumi.

The "dispatch law" was passed in the mid-'80s. In 1999 the law was relaxed to allow dispatch labor in 26 specialized industries, according to Yasushi Iguchi, a labor economist at Kwansei Gakuin University, and in 2004 it was further relaxed to allow short-term dispatch labor in the manufacturing sector.

Large auto and electronics manufacturing firms led the way in a temp-hiring surge, driven by cost-cutting plans, Iguchi said.

"Automakers hired a temporary work force because that was a better fit with the 'just-in-time' delivery system," he said. "These workers are very flexible. They're 'just-in-time' laborers."

Toyota is typical. In 2000, the company began a program of aggressive cost-cutting, according to Saichi Kurematsu, chairman of the Aichi Prefectural Federation of Trade Unions, whose members include 10 Toyota employees.

Toyota targeted 30-percent cuts in the first three years, and 15 percent more cuts in the next three. Last December it announced planned cuts of an additional 30 percent, Kurematsu said.

To get leaner, Toyota boosted its hiring of temps, he said, some of whom then saw their salaries slashed. Dispatch workers assigned to Toyota earned 1,800 yen per hour in 2004 but made just 1,150 yen per hour by 2007, said Kurematsu. (Toyota declined comment on those numbers but noted that such salaries were determined by the dispatch company.)

According to emails from Toyota spokesman Paul Nolasco, the firm used a peak of 1,350 dispatch workers on its assembly lines in 2004, but no longer uses such labor on the lines.

He said Toyota employs roughly 70,000 full-timers and about 4,000 dispatch office workers. On its assembly lines, its workforce includes 2,300 temps on fixed-term contracts of three months to three years — down from about 10,000 such contract workers on assembly lines in mid-2008, prior to the downturn.

Temps on fixed-term contracts make less than 60 percent what permanent workers make on average, according to a report from the National Labor Committee. (Toyota said it does not comment on employees' salaries. But it noted that more than 2,000 fixed-term contract workers have been bumped up to full-time employee status since 2007.)

Where are the unions?

Ironically, Japan has some of the most worker-friendly labor laws in the world. For example, there's no limit on the number of unions allowed at one company, and as few as a single worker are legally allowed to form a union.

The U.S. is responsible for that. Left-leaning American advisers drafted Japan's current constitution and related labor regulations during the post-World War II occupation.

But these days, Japan is dominated by large "company" unions that typically represent only permanent workers. Most come under the umbrella of Rengo, Japan's largest trade confederation with some 7 million members.

Rengo looks out for the wages of full-timers, but provides scant help for Japan's growing ranks of temps, most of who are non-unionized.

"These big trade unions have the same opinion as employers about everything," said Yamahara Katsuji, Osaka-based chair of General Union, a small independent union. "So they agree on the need for disposable workers in their factories."

Some top officials even rotate between union and management posts at the same company, he and others said.

"Nearly all major unions have close ties to management, inhibiting them from demanding improved work conditions," wrote sociologists Weathers and North.

Temp Nation the series:

The demise of fulltime employment

Fighting Panasonic

The foreign effect

A political solution?

Editor's note: This article was updated with the fact that the marriage rate was 5.8 per 1,000 people in 2008, down from more than 10 per 1,000 people in the early 1970s.