Hiroyuki Taruki, executive director of High Metal in
Osaka, worked with a shearing machine at the factory.
OSAKA, Japan — When the sheet metal orders coming into his small
business, High Metal, fell by half last October, it never occurred
to Masaaki Taruki to lay off his workers.
Instead, he set about brainstorming new projects to occupy them.
An indoor vegetable garden? A handicrafts workshop?
Because of government subsidies, Mr. Taruki in the last three
months installed rows of parsley, watercress and other plants,
using factory space that has been empty since the company disposed
of unused machinery. High Metal’s staff tend the sprouts
religiously, topping up the water supply, adding fertilizer and
adjusting the fluorescent lights.
When sales at the machinery maker Shinano Kogyo in central Japan
plunged some 70 percent late last year, the company started
dispatching its idle workers to sweep the streets and pick up trash
in the wider community, while remaining on the payroll.
According to statistics released Wednesday, the Japanese economy
suffered its worst contraction since 1955 in the first quarter,
declining 15.2 percent on an annualized basis. But a far smaller
portion of workers have lost their jobs in Japan than in either the
United States or the European Union.
(Japan’s unemployment rate in April was 4.8 percent, compared with
8.9 percent in the United States and Europe.)
Analysts say this is because lifetime employment is alive and
well in Japan, with the state playing a big role in keeping it
so.
“Job tenure in Japan remains remarkably long,” said Peter
Matanle, an expert on Japanese employment at the University of
Sheffield in Britain. “Companies get rid of the buffers first.
They’ll get rid of temporary workers, reduce overtime, reduce
bonuses. They would squeeze their suppliers. They would do anything
before considering cutting regular workers.”
But Japan’s obsession with keeping workers employed — even those
who are not needed — comes at a cost.
Companies slash wages, which reduces consumer spending.
Businesses become more reluctant to take on new recruits, shutting
young people out of the labor force. And productivity plummets,
hurting Japan’s competitiveness in an increasingly aggressive
international market.
“By helping to maintain excess employment, you face the risk of
keeping alive businesses that are no longer competitive, and
perhaps whose productive era is over,” said Hisashi Yamada, an
economist at the Japan Research Institute, a private research group
in Tokyo. “This could hurt employment in the long run. What you
need is more structural change.”
The lifetime employment system, cemented in Japan’s postwar
economic boom, bound dutiful workers and paternalistic employers
together, producing a mutual loyalty (and labor harmony) rarely
seen in the West.
By law, employers can cut workers’ hours but must pay at least
60 percent of their hourly wages during that time. The government
has budgeted 60 billion yen, or about $624 million, this year to
reimburse companies for half of those payments. In March, about
48,000 companies sought subsidies for 2.38 million employees,
government figures show.
Even large exporters, like Nissan
Motor and NEC Electronics, have used the subsidies to keep
workers employed despite shorter factory hours.
In a recent survey by the Nikkei financial daily, zero percent
of large business owners said they had plans to lay off permanent
staff members, compared with 39 percent in South Korea. Experts say
that without subsidies, Japan’s unemployment rate would be as much
as 2 percentage points higher.
Since Japanese workers are hard to lay off, companies have
turned to temporary workers, who receive lower pay and fewer
benefits, and can be cut more easily. Such workers now make up a
third of Japan’s work force.
But keeping all those permanent staff members occupied is its
own challenge.
Mr. Taruki’s factory has been abuzz with activity over the
vegetable garden. Using another government subsidy, Mr. Taruki
spent 5 million yen to start a handicrafts workshop, installing a
laser etching machine in a tiny room that had housed employee
lockers. There, an employee practiced etching patterns onto
lacquerware boards, small sheets of glass and other materials.
The company wants to make key chains and other trinkets, and is
exploring ways to make ornaments for Buddhist altars.
“Even if the economy starts recovering, I’m doubtful whether
we’ll ever bounce back entirely,” said Mr. Taruki, whose
grandfather started the factory in Osaka decades ago. “So I need to
start filling in what we’ve lost. It’s the responsibility of
companies to protect jobs, to grow them.”
But some analysts wonder whether the recession will
be so bad that Japanese companies will have to eventually start
cutting regular workers.
Labor leaders say cases are increasing in which employees are
subjected to such humiliating wage or hour cuts, or demotions, that
they are driven to quit.
Some analysts say a cold-eyed look at bloated payrolls is just
what Japanese companies need.
“Companies have hardly shed workers so far in this episode,”
Carl B. Weinberg, who runs the economics analysis firm High
Frequency Economics, said in a note to clients this month. “Massive
layoffs are imminent, but they won’t come soon enough.”