Lifetime Employment: An Evaluation

AS A RESULT OF JAPAN'S UNWRITTEN LIFETIME EMPLOYMENT POLICY,

NOT BECAUSE THE EXTERNAL LABOR MARKET IS CONSTRICTED

In a Columbia Law Review article published in 1999 -- "Lifetime Employment: Labor Peace and the Evolution of Japanese Corporate Governance" -- authors Gilson & Roe maintain that the Japanese practice of constricting the external labor market is responsible for firms' willingness to invest in human capital. They specifically reject the proposition that Japan's institution of lifetime employment could be the impetus for such corporate outlay. It is contended here, however, that social norms, coupled with a divergent development of Japan's employment law, gave rise to its lifetime employment policy, and that this resulting policy accounts for employers' willingness to invest in human capital. A closed market is the result -- not the cause -- of corporate investment in employees.

HISTORICAL EVOLUTION OF LIFETIME EMPLOYMENT

Although lifetime employment has become a fixture in Japan's body of employment policy and practice, this system was only first identified in 1958. The concept can basically be described as follows:

Workers become employed right after their graduation from school with a particular company. The employer will not lay off his workers if possible even in the course of depression. The employee in turn will not quit his job at this company but tend to contin

. . .
The system of lifetime employment itself rests on yet another unwritten principle, i.e., restrictions on discharge. Japanese social values consider it the employer's duty "not to dismiss employees thoughtlessly, even when efficiency or other economic considerations would make dismissal a reasonable choice for an employer." Perhaps deemed equally unreasonable by Western standards, is the following Japanese belief: [I]t is considered unfair to fire an employee based solely on grounds of unproductively or incompetence. Since the employer controls when and how an employee works for the company on the basis of the employer's own strategic concerns, prevailing social norms make the employer responsible for the result of an employee's placement. Thus, Japanese companies rarely fire employees that prove incompetent, but rather delegate such workers to insignificant jobs devoid of all promotional opportunities. To illustrate, the president of Toshiba stated that "a company has the responsibility of protecting its employees," while the president of Chichibu Cement called the discharge of employees "the worst sin of an employer." Further, a sort of gentlemen's agreement exists among larger firms whereby they will not prosely
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Some common words found in the essay are:
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Approximate Word count = 2311
Approximate Pages = 9 (250 words per page)

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