During Japan’s “bubble economy” which started from about 1950 up until about 1990 with lingering effects up until about 2000, older employees could just show up for work and because of their seniority only were paid higher salaries. Their salaries weren’t based so much on actual skills and performance as they were on age and seniority regardless if they were skilled with management ability with people or good managers. That is all changing, so the general feeling is we are going to see a lot more older Japanese men in their 50s out on the streets looking for alternative work as Japan Inc.’s corporate policies begin making rapid changes. Japan Inc. can no longer afford to pay out these large salaries based only on age and seniority, from now on it will take skills and ability to hold employment as Japan’s corporations streamline. All this loyalty to Japan’s corporations is coming to an end with one company offering its employees time off to raise families which must be a first in Japan.
Japan seeks alternatives to its pay system
By Mariko Oi Business reporter, Japan
It’s a simple task, if you’re trying to spot the highest paid employee in a Japanese office. Just look for the oldest staff member. Traditionally, the longer you’ve been at a company, the more money you earn.
In Japan’s corporate culture, this is commonly referred to as the seniority wage system. It has been in place since the 1950s.
During Japan’s economic boom, the system worked well in combination with another unique aspect of its labour market – the guarantee of a job for life. And back then, companies could afford to raise salaries as a reward for the staff’s loyalty.
It is standard practice for businesses to offer a low remuneration package to fresh graduates, who are then trained on-the-job. Even today, the average starting salary in Japan is roughly 2.5 million Japanese yen or $22,000. In the UK it is £28,000 or $40,000. In America, the average starting salary is higher at $50,000.
But Japan’s seniority wage system started to crumble after the economic bubble burst in the 1990s.
Companies had to restructure their operations, trim expenses and, in most cases, implement job cuts. The redundancies came as a shock to many employees who had thought that their lives (and livelihood) would be well looked after until retirement.
“It’s like a couple who just found out that their partner was cheating on them. Workers felt betrayed,” said Toshiaki Matsumoto director at the Society for Human Resource Management.
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