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Before the first oil shock in 1973, the Japanese economy experienced several recessions, but the long-term trend was a period of steady economic growth known as the period of high economic growth. This period of high economic growth was supported by a so-called "catch-up" economy, where products and technologies developed in advanced Western countries were analyzed and improved to increase quality and productivity. Although Japan was the second largest economy in the world in terms of GDP in the 1970s, it maintained a competitive strategy suited to a catch-up economy. Japanese-style personnel management was developed in a way suited to this catch-up economy, and became established in Japanese society. What is needed in a catch-up economy is the ability to do set tasks quickly and accurately, and long-term employment is very effective in this regard.

Long-term employment means working with the same members for many years, which makes it easier for people to understand each other's ideas and naturally leads to similar values. In order to move forward with a set goal in unison, it is more efficient to bring together people with similar knowledge, skills, and ways of thinking. Long-term employment makes sense.

Long-term employment and the seniority system are complementary. First, the seniority system is premised on long-term employment. In the seniority system, when you are young, you work for a wage lower than your work performance, and when you reach middle age, you are paid a wage higher than your work performance. This is why companies guarantee long-term employment to convince employees. Furthermore, employees are less likely to think about changing jobs because their wages will eventually increase if they work for the same company for a long time.

Long-term employment and seniority-based systems simultaneously create fierce competition within a company. At first glance, this seems contradictory, but it makes sense when you think about it. In other words, even if it is a seniority-based system, performance evaluations are conducted for everyone, and promotions and salary increases are not equal. If there is a large difference in promotions and raises at a young age, as opposed to the seniority-based system, many employees will drop out of the race for promotion, and they will no longer work hard to aim for promotion. On the other hand, if there is not much difference in promotions and raises at a young age, many employees will compete for promotion for a long time. To achieve this, Japan has used an ambiguous evaluation system in which everyone receives raises and promotions to a certain extent, and as a result, a so-called "late selection" has been practiced, where there is no difference in promotion until the latter half of one's career.

What made this competition possible was the division of labor between men and women. The division of labor, where men earn a wage and support the entire family while women take care of the housework and childcare, originated in Western countries after the Industrial Revolution of heavy industry. In Europe and the United States, the division of labor between men and women gradually began around the end of the 19th century. It reached its peak in the 1950s and 1960s, but from the 1970s onwards, things changed as the economy lost its competitiveness, and women began to advance in society. Social movements such as the women's liberation movement also supported women's advancement in society.

Then, in the 1970s and 1980s, when women began to advance into the workforce in Western countries, Japan lagged behind in the gender division of labor, with a clear trend of men working hard in companies and women staying at home as full-time housewives. The government also actively supported a society with a gender division of labor, introducing systems such as spousal deductions and dependent allowances to support this family model. When you think about it this way, you can say that systems such as gender division of labor, long-term employment, and seniority-based systems took root not because they suited Japanese society, but because they suited Japan's catch-up economy. And as long as Japan was chasing the West, these systems worked effectively and produced results.

However, since the 1990s, globalization has progressed in earnest, and Japan has lost its cost competitiveness to emerging countries. Naturally, changes are required in Japanese-style personnel strategies. Here, I would like to point out two problems.

One is that monotone companies cannot create new things. Organizations with similar human resources, which were beneficial in catch-up models, are weak to change and do not easily produce innovative ideas. It has become necessary to transform into organizations that bring together diverse people with different experiences and values by utilizing women and stimulating job-changing.

Another issue is individual employment insecurity. Globalization and M&A have spread, and the sale of business units has also increased. We are now in an era where companies are changing in ways that they have never done before, and it has become necessary to evaluate individuals on what kind of work they have done and what they can do, rather than on age and years of service, which are the criteria for seniority systems. However, many companies do not foster the knowledge and skills to clarify and evaluate the job content of individuals.

In the past, long-term employment, seniority-based systems, and gender-based division of labor were the foundations for strengthening the competitiveness of the Japanese economy, and companies and the government worked together to create systems and regulations that suited them. A social structure was created in which those who used such systems had an advantage, and personnel affairs became embedded in society. The reason why changes to personnel affairs in companies are difficult to make despite being an issue is that they require major social changes.

So how should Japanese society and human resources change in the world of the future? I believe that a "society where everyone works a reasonable amount of time" is the most productive way for developed countries to be. The "time" part is key. Time is short, but we should work creatively and productively.

Unlike catch-up countries, developed countries cannot expect economic growth unless they create new things and ideas. Productivity should increase if people work with diverse members, reduce their working hours, and create time to broaden their horizons and learn new things. In developed countries, the most productive situation is when "everyone works a reasonable amount of time."

In the 1970s and 1980s, the countries that were able to halt the decline in the birthrate among those that were leaning toward a declining birthrate and an aging population were the United States, Northern Europe, and other countries that introduced a model in which "both men and women work a reasonable amount of time and do a reasonable amount of housework and childcare at the same time." Some European countries, such as Northern Europe, introduced measures to encourage men and women to raise children together and for women to return to work early. Instead of enhancing childcare leave and reduced working hours, they provided direct support to families with children who worked full-time, such as subsidies for hiring someone to take children to and from daycare. Such subsidies allow parents to return to work early and pay taxes and social security fees properly, which will enrich the national finances. Of course, reduced working hours and childcare leave are also important measures to combat the declining birthrate. If both men and women use these systems, everyone will work a reasonable amount of time throughout their lives. There is no loss in having children and it will not damage one's career. Such a system would improve the productivity of society as a whole, lead to benefits for the national finances, and lead to personal happiness.

"Equal pay for equal work" is an issue closely related to encouraging job-changing and diversity. In Japan today, the term "equal pay for equal work" is used in discussions about full-time and non-regular employees working in the same organization. However, in the world, it means more broadly that "in the entire labor market, the same job is paid the same at any company or organization." If wages are determined according to the work you do, you can earn the same wage no matter where you work, regardless of your age or years of service, which makes it easier to change jobs and increases diversity.

To realize "equal pay for equal work" in this sense, not only the employees themselves, but also their superiors and Personnel Affairs Department need to understand and evaluate the content of each employee's job. Japanese companies, which have continued to have ambiguous evaluation systems up until now, are lacking in this ability, and this can be said to be one of the major challenges.

Furthermore, this shift to wages commensurate with the work is deeply related to the issues of education costs and scholarships. Many companies' salaries are a living wage, which is the sum of the work's compensation plus dependent allowances. This can also be said to be "companies giving parents educational expenses in the form of wages." However, society should raise the next generation that will support society, and education costs should be borne by society. The true meaning of social security is for parents to receive a wage commensurate with their work, and for education costs to be paid for directly by society for their children. Education can be received regardless of the parents' income, and outstanding students can be given additional scholarships. I believe that an ideal environment would be one in which the human resources thus cultivated can produce new results and create the next society.

Ending the Japanese-style "late selection" system would give the younger generation a second chance. Even if they resign early in their careers, they could earn a higher wage in their next job by making an effort to increase their value in the labor market, such as by obtaining an MBA.

More than 20 years have passed since the Japanese-style HR strategy reached a turning point, and an increasing number of companies, particularly large global companies, are introducing HR management based on job duties and roles. However, overall, it will take some time before such systems are operational. A change in HR strategy is a key element in halting the declining birthrate and aging population and realizing a society in which everyone is active. The ability for each worker to think about their own career, have their individual work evaluated correctly, and use a HR system that promotes this will surely be key points in considering Japan's future growth.

(Published in 2019)