Japanese Keidanren Calls for Abolishing Seniority System... Urges Change in Rigid Employment Practices

Chairman Hiroaki Nakanishi: "Current Employment System Cannot Prevent the Outflow of Talented Personnel Overseas"

Likely to Serve as Management Guidelines in Spring Labor Negotiations

[Asia Economy Reporter Kwon Jaehee] Japan's largest economic organization, Keidanren, has called for improvements to the Japanese-style employment system centered on seniority-based promotion. This is expected to serve as a guideline for management in the upcoming spring labor negotiations.

According to the Nihon Keizai Shimbun on the 21st, Keidanren appealed for improvements to the wage system based on seniority and an increase in job positions based on job functions. This reflects concerns that Japanese companies may fall behind in the competition for talent against overseas firms.

While Keidanren's previous stance focused on management's position in wage negotiations, this time the emphasis was placed on reexamining the Japanese-style employment system, which is based on new graduate recruitment, lifetime employment, and seniority. This is due to changes in the business environment brought about by digitalization and globalization.

Chairman Hiroaki Nakanishi expressed a sense of crisis, stating, "Under the current system, it is difficult for companies to fully demonstrate their strengths, making it challenging to secure motivated and talented young personnel. In particular, the risk of losing talent overseas is increasing significantly."

He continued, "It is unrealistic for economic leaders to dictate detailed wage increase methods. Rather than setting uniform standards, companies should positively review these matters according to their individual circumstances."

Keidanren especially highlighted that "job-type positions" are effective in securing high-level talent. Citing that foreign-affiliated companies commonly recruit based on job types, Keidanren emphasized that even if seniority is low, companies should offer high salaries to secure highly skilled personnel with expertise in their roles.

According to the American consulting firm Draup, the number of AI-related specialists working in business fields in Japan is 18,000, which is far fewer than 130,000 in the United States and 70,000 in China. Keidanren pointed to Japan's rigid employment system as the cause.

Based on this, there is a growing movement among Japanese companies to operate employment and wage systems more flexibly. According to a "CEO 100 Survey" conducted by the Nihon Keizai Shimbun, 63% of companies have either introduced or are considering introducing a job-type employment system.

Furthermore, Keidanren pointed out that as employment flexibility progresses, changes in the traditional labor-management relationship?characterized by confrontations between management and labor unions?are inevitable. Because employment contracts within companies will diversify, individual negotiations will become more important than negotiations between unions and management.

Keidanren also called for changes in wage negotiation methods, pointing out that uniform wage negotiations across industries are unrealistic. It mentioned that the decline in union membership rates in individual companies is due to uniform wage negotiations targeting all employees.