Japan firms hiring full-time despite potentially slimmer profits

After decades of inferior arrangements, contract and part-time workers in Japan can look forward to better job security despite its potential to squeeze companies’ profits.

These contract and part-time workers, which make up to a third of Japan’s labor force, receive lower wages, with pay averaging at ¥211,800 (US$1,924) last year compared to ¥321,700 (US$2,932) for regular workers, Reuters reported. They also enjoy fewer benefits and are easy to hire and fire.

The shift is occasioned by Japan’s aging and declining population that has resulted in a tight labor market. In 2015, the number of full-time permanent workers stopped falling for the first time in eight years, according to the labor ministry.  It has grown by about 800,000 since then to reach 33.7 million.
And last year, the share of non-regular workers stopped rising for the first time in seven years, now hovering at 37.5% of the total workforce.

The trend is expected to continue. A revised labor contract law, which will be in force next April, will also require companies to provide permanent status to temporary workers who have served for more than five years, if they request it.

“We consider this as necessary investment for the future rather than a burden,” Mayumi Kuroda, a spokeswoman for Credit Saison, told Reuters. This month her company plans to turn 2,200 part-timers and contract workers into regulars.

These employees will qualify for bonuses and benefits, such as retirement plans, when they join the regular ranks.

“We are fully aware of the risk that keeping employees as regular workers will raise fixed personnel costs,” said Takayoshi Hontao, chairman of Going.com.

But Muneaki Harada, president of plastering firm Harada Sakan, said the benefits outweigh the costs. “There’s a risk of fixing costs, but I believe benefits outweigh costs,” he said.

Expected benefits come in the form of keeping up motivation and boosting creativity.

“When the company offered me a permanent job last year, I felt I was needed, which has increased my motivation. It opened the doors for my promotion to a section chief, and a pay raise,” Mami Tanaka, a 29-year-old employee at Going.com, told Reuters.

Japan’s employment system has suffered since the early 1990s after an asset bubble burst. Companies with excess capacity and debt leaned toward non-regular workers to cut their costs. The practice has, however, curbed wages and consumer spending.

It’s a step in the right direction, Takahiko Uesugi, a human resources section chief at Treebell Co., a computer system services provider, told Reuters.

“The IT industry has relied so much on contract workers. It gives a bad impression that engineers are working under a poor labor environment. It has gone too far.”