Analyzing the Puzzle of the Japanese Labor Market

Economic analysis of labor markets would be much easier were it not for the great success of the Japanese economy. If Japan were an economic basket-case, we would all argue over whether Japan’s problems stemmed from the horrendous job security practice of ‘lifetime employment’; absence of employment flexibility and low job mobility; management’s concern for employees instead of profits; and such peculiar institutions as extensive seniority wage payments, the Shunto Offensive, mandatory retirement, and the like. Labor relations specialists would decry the presence of enterprise level unionism that includes relatively high level white-collar workers (company unions in the US context), of labor disputes where workers strike by wearing a black band saying ‘On Strike’ while continuing to work, and of sharp differentiation between primary and secondary labor markets. Management specialists would denounce the long consultations and discussions with lower-level employees to reach consensus, as opposed to Western-style hierarchical decision-making; and would have called for greater division of labor in the production process.