Social contract under siege

0 Comments | Insight on the News, Feb 26, 1996 | by Willis Witter

When Akio Shirai received a pink slip at age 56, it was as though he were betrayed by his own family. "I loved the business with all my heart," says Shirai, who was manager of a construction-materials supply ply company in Tokyo. "After working there for 30 years, I was devastated."

Until recently, layoffs were unheard of in Japan. Workers took job security for granted. During hard times, companies expected shareholders to suffer, not employees.

But after four years of near-zero economic growth, with little prospect of improvement, the blue-suited salary man is becoming a favorite target of corporate cost cutters. Shirai, for example, received an ultimatum to leave the company or accept an on-site job with a substantial cut in his $120,000 annual salary. Having worked at a desk his entire life, he felt ill-prepared for such a major change in employment. He left the company and joined the Tokyo Managers Union, a group of some 320 unemployed or soon-to-be-jobless white-collar workers helping one another negotiate severance packages and otherwise ease the transition to second careers.

Japan's system of lifetime employment originally was limited to government workers and employees at companies big enough to be household names. But the system helped instill a sense of responsibility for workers' welfare even at small companies, and the attitude became an accepted part of Japanese culture.

That philosophy no longer holds, says Kyotsugu Shitara, secretary-general of the Tokyo Managers Union. "To win in international economic warfare, you need to downsize," he says. "America has been doing it for the past 10 years and now Japan is trying to follow suit."

The trend manifests itself in the nation's growing jobless rate, which hit 3.4 percent in November, the highest since the government began keeping records in 1953. Each week, Japanese newspapers carry announcements that big companies plan to cut their workforces. Recently, appliancemaker Sanyo Electric Co. announced it will cut 1,600 jobs because of escalating price competition and shifts of some production facilities to cheaper sites overseas. Like most big Japanese companies, Sanyo says it will accomplish its job cuts by hiring fewer college graduates and offering employees compensation to take early retirement.

The strong cultural bias against layoffs helps explain why Japan's jobless rate remains low compared with most Western nations, some of which have experienced double-digit unemployment. Nothing in Japan compares to the blood-letting at big American companies such as AT&T, which is cutting 40,000 jobs this year, the latest in a series of staff reductions since the breakup of its U.S. telephone monopoly in the mid-eighties.

But while large-scale layoffs remain rare in Japan, companies have targeted middle managers with surgical precision, trying to trim payrolls bloated by years of automatic raises. Within the last year, anyone over age 35 who makes more than $90,000 at a big company or more than $60,000 at a small or midsize enterprise has become a target, according to Shitara. (By Japanese standards, those salaries are not particularly high. The Japanese need twice as much money as Americans to enjoy the same purchasing power; an entry-level clerk at a Japanese convenience store easily can earn $30,000 a year.)

Sometimes a company lacks the courage to tell a worker he or she no longer is wanted. Instead, it browbeats the employee. According to Shitara, one company told a worker there was nothing for him to do, then assigned him the task of writing a new essay every two weeks titled "My Second Life." He studied a book about the lives of insects to get fresh ideas for the grueling ritual. "It's a lot like the bullying that goes on in schools," says Shitara.