Secret of Japan's success

PM Khaleda Zia meets with Emperor Akihito. PHOTO: AFP

Japan's development in the fields of economy didn't come overnight. It was the result of the Japanese government's unique and effective policies and regulations. During the post-war period, Japan realised that their biggest asset were their employees of various companies. If they need to get a raise in the economy, they need to focus on their employees more than any other prospect of the company. Therefore, the government of Japan specified some regulations in the employment system. One of which was "lifetime employment."

Lifetime employment, as mentioned by E. J. Lincoln in his article in Brooking Review is a "practice at large farms of hiring workers directly out of school and retaining them until mandatory retirement age." Japan needed a stable workforce after World War II for a raise in productivity. To get a stable workforce wasn't easy because most of the Japanese people were devastated by the war and attracting the employees toward their work was a relatively hard task. Therefore the government of Japan came up with the "lifetime employment" strategy to make the employees more motivated toward their work.

Though this method of hiring employees for the rest of their lifetime was quite new and surreal into other developed or developing countries, Japan was committed to make it a success. Japanese companies started to put more emphasis on their employees more than the share holders which increased the earnestness and constancy of the workers. Such acts by the companies also helped to increase annual profit as the company's workers were more devoted to their work than ever.

The influence of "lifetime employment" became quite clear in 1970 when Japan faced a major crisis in its oil supply. At that time, Japan needed more investment to recover from the loss. But during that period, some Japanese employees of affiliated companies were supposed to achieve their annual increment in salary. But the labour unions did not demand their promotion because that might hamper the financial condition of the companies. They also realised that they were in the same boat along with the companies. And if the companies drowned, they would have to drown with it. This indicates that the employees were concerned about their companies and they understood that their fate depended on the productivity of their companies.

Although "lifetime employment" played a key role in Japan's post-war economic expansion, some economists assume that it isn't advantageous for today's modern economic world. As mentioned in Japan Digest, lifetime employment is one of the reason's suggested for Japan's "stagnant productivity growth rate and high costs." It is also causing unemployment. Moreover, many Japanese companies have a large number of workers who aren't needed anymore. Those companies are unable to fire them because of the "lifetime employment" scheme which is regulated by the government of Japan.

To conclude, lifetime employment shows that employees are the power of a company's economic profit and expansion. Developed countries should recognise this method to make the employees more faithful and devoted towards the company. This will, beyond doubt, have a very positive impact on the performance of the company.

Faisal Ahmed is studying Economics at Monash University, Australia.