A Loyalty Endangered

One of the great strengths of the Japanese economy has been the extraordinary bond uniting workers and their bosses--the famous lifetime employment system. Once hired, a worker can traditionally expect complete job security for the rest of his career. Executives treat employees as members of a huge family; they devise company songs, run company sports clubs and even will slash their own salaries to avoid laying off workers. In return, companies receive--and reward--intense loyalty. Wages and benefits are determined by seniority; a man or woman who has been with a company for 30 years makes, on the average, four times as much as a newly hired worker, though both may do the same job. Result: minimum unemployment and maximum morale year after year.

Now, reports the Japanese Ministry of Labor in a recent White Paper, this traditional arrangement is being challenged by enormous pressures for change. Japan's long postwar boom, in which the G.N.P. grew by an average of around 10% every year, has ended, and Japanese economic planners are expecting a modest 5% to 6% annual growth rate. Such a condition of low growth will necessarily cut job opportunities: unemployment has already crept up from a minuscule 1% to 2%. In addition, warns the White Paper, the composition of the labor force itself has radically altered. It is getting older--and such a change has profound economic implications if the lifetime employment system continues.

Baby Boom. Until recently there was a torrent of young Japanese flowing into the work force--the product of the "baby boom" of the late 1940s and early 1950s. But because the yearly birth rate has subsequently dropped by 50%, the bulk of today's labor force is aging rapidly. In 1970, working males in the 45 to 64 age group accounted for 26.8% of the total. By 1980 the same group will form 33.9%. Since the lifetime employment system rewards seniority, labor costs must rise as the proportion of older workers grows--a worrisome prospect in a heavily industrialized economy.

Education poses a related difficulty.

By tradition, a junior high school graduate will accept a manual job, a high school graduate will take only white collar work, and a college grad only a managerial or professional post. Right now, 92% of Japanese youths are heading for high school diplomas and 68% of those getting them want college degrees. The danger, the White Paper points out, is that Japan's new low-growth economy will not generate enough jobs at the top, while the demand for blue-collar workers will go unfilled.

Clearly the quickest way to cut through the interwoven problems is to discard the rigid traditions. Though the White Paper recognizes that solution, its authors correctly fear that the old traditions are far too deeply entrenched to be changed without tremendous dislocations in Japanese society. Big corporations have avoided the issue so far by choosing an alternative answer: to cut the number of new workers hired while keeping productivity per worker high with more automation in factories. This year, for example, the giant Tokyo Shibaura Electric Co. will take on only 700 new workers to replace the 3,000 who are reaching retirement age.

This is obviously a risky course. It will almost certainly create more unemployment in a nation that has virtually no experience in dealing with that devastating social problem. But dismantling the traditional system would surely erode workers' vaunted loyalty to their companies. If there is a middle way out of the dilemma--say, a natural trend toward a new tradition of rewards for ability--it is not yet evident.

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