The Japanese employment system has been primarily guided by three principles: lifelong employment, seniority wage, and single enterprise union (a company union that is not industry-wide or a craft union). After the end of World War II, these three pillars of the employment system were regulated by the Labor Relations Adjustment Act (1946), the Labor Standards Act (1947), and the Labor Union Act (1949). The nation adhered to this structure for decades and experienced phases of growth, especially between 1955 and 1973. During this period, employment numbers and average wages strongly increased, and companies offered lifelong securities to their employees. Japan also established strict regulations for the dismissal of workers and other worker's rights during that time.
Following the economic stagnation in the 1990s, some companies introduced performance-based assessments instead of seniority-based promotions. This process eroded some of the lifetime securities of employees. Additionally, the hiring of non-regular and temporary employees became increasingly common. Consequently, around 53 percent of women and 23 percent of men in Japan were in irregular employment in 2022.
Despite long working hours, labor productivity in Japan is lower compared to the Group of Seven nations. To improve working conditions for employees, the government enacted the Work Style Reform Act in 2018. The act included labor law amendments such as setting a limit to overtime. Since 2019, employees are allowed to work a maximum of 45 hours of overtime a month. Closing the gap between permanent and non-permanent employees in income and working conditions was also addressed in the reform. All employees within a company must be paid equally when engaging in the same task starting from 2020.
The outbreak of the coronavirus disease (COVID-19) facilitated broad changes to the traditional working style of many companies. The proportion of companies offering remote work, for example, leaped by more than 27 percent to around 48 percent in 2020 and remained at over 51 percent in the following years.
The female employment rate exceeded 50 percent for the first time in 2018. The employment rate of seniors was 25 percent in 2023. This number is expected to substantially grow in the coming years because companies are obliged to make efforts to offer working opportunities for employees until the age of 70 from 2021 and onwards. Furthermore, foreign workers are also anticipated to increase through labor-related immigration in the coming years.
Following the economic stagnation in the 1990s, some companies introduced performance-based assessments instead of seniority-based promotions. This process eroded some of the lifetime securities of employees. Additionally, the hiring of non-regular and temporary employees became increasingly common. Consequently, around 53 percent of women and 23 percent of men in Japan were in irregular employment in 2022.
Working conditions
In exchange for permanent contracts, Japanese employees are often required to agree to, for example, branch relocations, department transfers, and/or extended working hours at any point of their career. Performance-based evaluations are also often still used under these conditions and unpaid overtime and overwork are common. These conditions have led to an increase in work-related illness or deaths (suicides or deaths from overwork- karoshi) since the 1990s.Despite long working hours, labor productivity in Japan is lower compared to the Group of Seven nations. To improve working conditions for employees, the government enacted the Work Style Reform Act in 2018. The act included labor law amendments such as setting a limit to overtime. Since 2019, employees are allowed to work a maximum of 45 hours of overtime a month. Closing the gap between permanent and non-permanent employees in income and working conditions was also addressed in the reform. All employees within a company must be paid equally when engaging in the same task starting from 2020.
The outbreak of the coronavirus disease (COVID-19) facilitated broad changes to the traditional working style of many companies. The proportion of companies offering remote work, for example, leaped by more than 27 percent to around 48 percent in 2020 and remained at over 51 percent in the following years.
Unemployment rate and labor shortage
In recent years, Japan's unemployment rate has been relatively low compared to other nations. Despite the COVID-19 pandemic and reported number of dismissals directly related, the unemployment rate remained at around three percent during 2020. The comparatively low unemployment rate is mainly due to a general labor shortage as a direct consequence of Japan’s super-aged demographic and shrinking work population. The government has promoted active labor participation of women and seniors aged 65 years and older to alleviate the long-term workforce shortage.The female employment rate exceeded 50 percent for the first time in 2018. The employment rate of seniors was 25 percent in 2023. This number is expected to substantially grow in the coming years because companies are obliged to make efforts to offer working opportunities for employees until the age of 70 from 2021 and onwards. Furthermore, foreign workers are also anticipated to increase through labor-related immigration in the coming years.
