Yoshihiko Miyauchi, chairman of Japan's Regulatory Reform Committee, has been front and center in the battle to unravel the web of laws and rules that constrict growth. Miyauchi's three-year tenure leading the committee, which reports directly to the Prime Minister, comes to a close on Mar. 31. Tokyo correspondent Ken Belson spoke to Miyauchi, who doubles as chairman and CEO of Orix Corp., the country's largest leasing company. Belson asked Miyauchi about the committee's efforts to relax Japan's tight labor laws.
Q: What are the goals of your committee regarding the labor market?
A: In order to restore vitality in the Japanese economy, it is necessary to prepare a variety of employment opportunities to meet individual ability, qualifications, and employment goals. However, the present economy, including the pension system, is premised on long-term, continued employment. Employment and labor laws are part of this system. A more flexible system in itself is not necessarily the goal, but we do believe that deregulation is necessary to create an environment that makes possible a variety of employment types. If an optimum movement of labor for both individuals and companies results, that might lead to more a more flexible workforce.
Q: What has your committee achieved in the area of labor-market deregulation?
A: The Three-Year Program for Promoting Deregulation will end at the end of March, and a new three-year plan is expected to be drafted. Our committee has tried to change the shape of the labor market, but the ideas have been quite difficult for the bureaucrats to accept. They now understand what's going on in the real world, but they still have a strong wish to maintain full employment at established companies. They are always behind the reality.
The big priority is to give workers more freedom to seek their own career without losing any benefits. We are shifting [the focus] from labor union protection to worker self-responsibility. However, labor unions are still strong in the market [and resist such changes].
We have made some progress, though. For example, in the revised Labor Standards Law, multiple-year contracts of up to three years were made possible (in the past, only one-year contracts were permitted), but strict conditions were placed on such contracts, like those that limit the contracts to people with a high level of specialized knowledge.
In addition, the types of jobs for which temporary employment agencies could send workers were greatly expanded, but this area should be monitored to see if the reforms are having an impact, and there should be consideration of expanding the scope of coverage of the law.
Q: What other changes are needed?
A: If mobile pensions were provided, more people would have the freedom to leave their companies. [The government is debating proposals for 401(k)-style plans. The Finance Ministry says tax benefits for portable and nonportable plans must be equal.] The Finance Ministry's principle is very socialistic. They understand the thinking behind portable pensions, but they don't want any policy that allows winners to contribute more.
Work style is another issue. The law limits [the length of] contracts for workers. Recent deregulation of has initiated new laws, but they are insufficient. The door is not open wide enough.
Labor law also does not provide any written rules for firing people, although the courts often treat workers' claims favorably. We need laws that clearly stipulate conditions when companies can fire workers. At this time, the Labor Ministry is not ready to write those laws.
Q: What impact will a more flexible workforce have on Japan's economy?
A: An optimum allocation of labor is more likely to result in better economic performance. As regulatory reform progresses, more market mechanisms will take effect, and some companies that cannot compete will fail, resulting in a possible increase in unemployment. However, with the introduction of a more market-based economy, new businesses can create new employment opportunities. It is the role of politicians to implement policies to help unemployed workers find new employment opportunities.
Because the present labor legislation is premised on long-term, full employment, there are a lot of barriers to unemployed workers or those who want to switch jobs. It is necessary to further liberalize legislation on employment agencies, temporary employees, and multiple-year contracts.
Q: Japanese unions are still at the center of annual wage negotiations and are strong advocates of the so-called lifetime employment system. Where do they fit in?
A: Lifetime employment practices are over. Most big companies now push for early retirement. Thirty percent of new college graduates switch jobs within a few years. This is very different from employment practices [of the past]. Most young employees don't expect to work a lifetime in one company. If companies want to keep good employees, they must stimulate their minds. Companies must evaluate employees' value precisely or workers will change jobs.
One problem is the Labor Ministry still pays too much attention to labor unions. The ministry should know that the labor unions do not represent the majority of workers.
Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
Printer-Friendly Version
