Japanese lifetime employment: a century’s perspective

Abstract

The economic stagnation in the 1990s in Japan posed a serious challenge to the practice of “lifetime employment. ” Despite pessimistic predictions, however, empirical studies have found no major changes to the practice pertaining to core employees. Why does lifetime employment persist in Japan? This paper develops a conceptual framework motivated by personnel economics and sociology and explores the persistence and stability of Japanese lifetime employment from a historical perspective. In this paper, we view lifetime employment as a set of interdependent human resource management (HRM) practices surrounding an implicit and long-term employment contract. We further examine these firm-level practices within the context of an employment system in which micro-level practices interact with macro-level institutions. Using this framework, we study the formation and transformation of lifetime employment, focusing on key historical events such as the Great Depression, Postwar Occupation, High Growth, Oil Crisis, and the Post-Bubble stagnation. Our analysis shows that lifetime employment is a product of dynamic interactions among

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