2000 Reports

The end of "lifetime employment" in Japan? Evidence from national surveys and field research

Kato, Takao

Using both quantitative data from national surveys and qualitative data from our recent field research, this paper provides evidence on the recent transformation of Japan's celebrated practice of "lifetime employment" (or implicit long-term employment contract for the regular workforce). Overall, contrary to the popular rhetoric of "the end of lifetime employment," evidence points to the enduring nature of such practice in Japan. Specifically, we find little evidence for any major decline in the job retention rates of Japanese employees from the period prior to the burst of the bubble economy in late 1980s to the post-bubble period. In general, our field research corroborates the main finding from the job retention rates by describing vividly that large firms in Japan have been doing everything they can to avoid laying off their workers. However, the field research also points to a potentially important measurement issue with the job retention rates which may cause the job retention rates to overstate the importance of long-term employment in recent years. Lastly, the burden of downsizing appears to fall disproportionately on young workers and middle-age workers with shorter tenure.