The Theory of Institutionalization: Permanent Employment and Tradition in Japan

Abstract

The practice of permanent employment has come to be seen as a striking symbol of a unique industrial relations system in Japan. Permanent employment generally means that an employee enters a company after school graduation, receives in-company education and training, and remains an employee in the same company until the retirement age of fifty-five. Such a practice is commonly seen by Western economists as incompatible with the requirements of labor mobility in an advanced industrial society. At present, it is difficult to delimit exactly the number of workers covered by the practice of permanent employment. Government statistics are ill-suited for this purpose with their more nebulous category of regular workers. With the exception of such special categories as temporary workers, Japanese labor contracts, generally, bind the contracting parties together for an indefinite period of time. Permanent employment has been established as a company practice and employee behavioral pattern that is reinforced by the distribution of rewards according to age and length of service and strengthened by social and judicial pressures. For example, fellow employees are reluctant to accept as social equals those individuals hired with prior job experience. Employers commonly pay lower wages and give lower yearly wage increments to such employees. Judicial precedents specify that there must be just cause for dismissals. An employer is not safe in a dismissal case unless he can prove some reasonable cause.