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Messages from Keidanren Executives May, 2017 Goodbye to work-sharing

Yasumi KUDO Vice Chair, Keidanren
Chairman of the Board, NYK Line

A case of work-sharing in the Netherlands during 1980's is well known. The Wassenaar Accord of 1982, where the government, unions and companies reached an agreement to remove barriers to flexible part-time work with an introduction of equal treatment between part-time and full-time workers, realized economic recovery and unemployment rate reduction. It did not enhance productivity, however, as it focused on the maintenance of employment and curbed wage increases.

During the same period, Japanese companies held excessive number of employees in-house, and fell into a state of substantial work-sharing. It could be confirmed by the fact that the jobs-to-applicants ratio did not reach 1 in most periods after the oil shocks in 1970's, except for the following 3 periods; around 1990 in the bubble economy, around 2007 before the financial crisis, and after 2014 with a visibly declining population.

Massive deployments of manufacturing plants from Japan to abroad started during 1980's when the Japanese Yen became overly appreciated. Industries of low-productivity and low-wage, such as the service industry, offered employments in the place of manufacturing. At the same time, the number of limited-time workers and workers on temporary status increased. In general, manpower was ample.

If you look at the logistics industry, you will see how manpower has been inefficiently used. Whereas cargoes are placed on pallets in factories and warehouses, in many cases a truck driver is requested to load them onto a truck by hands without using pallets and forklifts, for a higher load factor and prevention of the loss of pallets. As a consequence, the time required for loading and unloading more than quadruple, and thus the turnover rate of the truck and the productivity of the driver become exacerbated.

Now the Japanese population started to shrink. Ways of working based on ample manpower no longer hold. Good opportunity has arrived to get rid of work-sharing and enhance productivity.

The Japanese population will show a full-scale decline in the near future. By 2040, the working-age population will shrink by 20 million to three quarters, whereas the elderly population will grow by more than tenth. The boost of labor participation rate among female and elderly population is necessary, but it would not be enough. Innovation may be a solution to the decreasing workforce in Japan. We cannot lose any time in improving productivity by daring application of innovation and aggressive investments in equipment, education and training.