Has Lifetime Employment Become Extinct in Japanese Enterprise? An Empirical Analysis of Employment Adjustment Practices in Japanese Companies

Abstract

The changing environment of Japanese enterprise has seen lower stability and continuity in employment. Although the tenure of regular employees has become longer, the continuity of employment is falling, while the increased use of non-regular employment means decreased tenure for employees as a whole. To determine whether the spread of employment adjustment with respect to regular employees of large firms is due to shifts in corporate behaviour or the result of changes in the market environment, a partial adjustment model was used to chart variations in employment adjustment. As a result, marginal changes were identified in the structure of employment practices between 1998 and 2001 in the majority of companies in four selected industries. Moreover, a panel analysis showed that while structural changes were not common to all industries, similar marginal changes in individual cases were suggested in some limited corporate groupings only. This led to an examination of the effect of non-regular employment and company groups (shihon keiretsu). Results showed high employment adjustment speeds as regards the increase in non-regular employees, as well as extremely high levels in company groups that have come to be seen as more important, in line with the shift to a consolidated base accounting system from 2000. Given recent environmental changes, we argue that Japanese companies coped by implementing a high employment adjustment capacity in non-regular employment and company groups as a whole, while restricting changes in employment practices related to regular employment in parent companies.