Has Japan's Long-Term Employment Practice Survived? Developments since the 1990S

Abstract

Japan's traditional long-term employment practice, loosely termed “lifetime employment,” once attracted much attention, but its fortunes have not been tracked since the 1990s. The authors use micro data from the Japanese government's Basic Survey on Wage Structure to estimate permanent full-time workers' tenure patterns in the years during and following Japan's decade-long recession. Mean tenure, they find, grew for both genders between 1990 and 2003. The main explanation for this trend was a changing relationship between tenure and the attributes of workers and firms, rather than changes in the attributes themselves—although the importance of the latter increased for some women. Beyond the tendency at the mean, the authors find substantial variation. Notably, workers who had gained employment protection under the traditional system, mostly in large firms, saw larger gains in mean tenure than did other workers. This divergence, the authors suggest, could eventually exacerbate lifetime income inequality in Japan.