The real impact of the Asian Economic Crisis of the late 1990s on Japanese Employment Relations

It has been suggested that the Asian economic crisis of the late 1990s placed a strong pressure to change on the traditions and institutions of East Asian countries. This ‘East Asian model of Capitalism’, which emphasizes government intervention and long term relationships instead of markets, has come to be regarded as a problem rather than a strength in the modern globalized environment. Whilst this crisis certainly forced employment relations in some East Asian countries to change drastically, the impact that this disaster had on Japanese ER is much more divisive and ambiguous.

The main argument advocating that the Asian economic crisis had a significant impact on Japanese employment relations is presented in Bamber, Lansbury and Wailes’ 2011 book ‘International and Comparative Employment Relations: Globalization and Change’. This argument essentially suggests that several marked changes have occurred in the Japanese employment system since this crisis and two specific examples include:

• Firms have experienced surplus labour that has restricted the recruitment of career employment to the strict minimum. Resultantly, young regular employees are often overworked with little paid leave.
• A growth in atypical employment and the subsequent erosion of long term career employment is evident.

However, there is also the opposing argument of Jung and Cheon that is presented in their 2006 journal article entitled ‘Economic Crisis and Changes in Employment Relations in Japan and Korea’ which suggests that the traditional traits of East Asian (and specifically Japanese) employment relations are being maintained and are not being significantly impacted. Whilst these authors concede that issues such as long-term employment and seniority based pay are changing to an extent due to strong pressures from globalisation and the economic crisis of the 1990s, it is incorrect to suggest that the traditional components of Japanese employment relations are changing drastically. Furthermore these authors suggest that the Japanese employment relations model is not replicating Western models such as the system implemented in the United States and that ER changes are dependent on national context.

What are your thoughts on the impact of the Asian Economic Crisis of the 1990s on the Japanese Employment Relations System? Has this crisis resulted in significant changes or have the traditional components of the Japanese system been maintained?

References-

• Bamber, GJ, Lansbury, RD & Wailes, N (2011) (Eds), International and comparative employment relations: globalisation and change, Allen & Unwin, Sydney. Chapter 10 and 11.
• Jung, E (2010), ‘Employment relations in Japan and Korea’ in Research Handbook of Comparative Employment Relations, Eds M Barry & A Wilkinson, Edward Elgar, Cheltenham, pp. 239-259 (unit reader).
• Jung, E & Cheon, B (2006), ‘Economic Crisis and Changes in Employment Relations in Japan and Korea’, Journal of Asian Survey, vol. 46, no. 3, pp. 457-476.

The German Employment Relations Model and its distinguishing feature in Co-Determination

In researching employment relations in Germany for this blog entry, I discovered a curious ER model that has its roots deeply entrenched in the aftermath of World War II and the unique conditions of this nation during this period. I found the principles of industrial unionism and unitary unionism of particular interest, however the one aspect of German employment relations that really absorbed me was its distinguishing feature in Co-determination.

Co-determination is a form of employee participation in management based on the idea of industrial democracy and originated in the Weimar Republic. The Works Constitution Act is the legal basis for co-determination at the workplace level and it gives works councils a set of rights relating to specific issues ranging from the right to information to veto rights. Through these rights, work councils are able to influence issues that remain ‘managerial prerogatives’ in other countries. These rights are legally guaranteed and enforceable, and on the basis of these rights, management and works councils negotiate works agreements that regulate issues such as rostering and redundancies. As works councils and management are obliged to cooperate in good faith and work councils are not allowed to strike, negotiations are generally not conflictual (Weiss & Schmidt 2000).

Two interesting journal articles that focus on Co-Determination in Germany’s Employment Relations System are Ellguth, Gerner and Stegmaier’s ‘Wage Effects of Work Councils and Opening Clauses: The German Case’ and ‘Work Councils in Germany: their effect on Establishment Performance’ by Addison, Schnabel and Wagner which both focus on the influence of co-determination and works councils on the German economy. The first of these articles finds evidence that work councils exhibit not only positive wage effects in general but also accomplish the task of safeguarding employees’ demands in challenging times (Ellguth, Gerner & Stegmaier 2012) and the second article supports these findings whilst also suggesting that works councils in Germany reduce labour fluctuation, increase productivity and maintain innovation levels (Addison, Schnabel & Wagner 2001). However, Addison, Schnabel and Wagner’s article also suggested that profitability levels decreased as a result of work councils.

What are your thoughts on Germany’s unique employment relations system and the concept of Co-Determination?

References-

·         Addison, J, Schnabel, C & Wagner, J (2001), ‘Works councils in Germany: their effects on establishment performance’, Oxford Economic Papers, 53, pp. 659-685.

·         Bamber, GJ, Lansbury, RD & Wailes, N (2011) (Eds), International and comparative employment relations: globalisation and change, Allen & Unwin, Sydney. Chapter 8.

·         Ellguth, P, Gerner, H & Stegmaier, J (2012), “Wage effects of works councils and opening clauses: The German case’, Journal of Employment Research, 35, pp.95-113.

·         Weiss, M & Schmidt, M (2000), Labour Law and Industrial Relations in the Federal Republic of Germany (3^rd Ed), Deventer, Kluwer.