Labor Market Adjustment to Globalization: Long-Term Employment in the United States and Japan

The increasing globalization of production and trade in the last 25 years has required substantial adjustment of employment relationships in the United States and Japan. Worker attachment to firms has always been lower in the U.S. than in Japan, and this is reflected in a difference in institutions. As both the U.S. and Japan have been faced with similar global competitive pressures, firms in the two countries have responded in ways that are consistent with their histories, institutions, and demographics. Firms in the United States have laid off workers, even those in long-term primary jobs. Firms in Japan have taken the approach of reassigning workers to other, perhaps lesser, jobs, seconding workers to other firms, and making more use of part-time and secondary jobs. The result of this difference in strategies is that the Japanese-U.S. gap in worker attachment to firms has widened, particularly for males. Interestingly, the Japanese labor market has made increased use of part-time and other non-standard workers, particularly for females, to an extent not seen in the United States.