Wage System Reform in Japan: From Seniority to Performance

Abstract

The seniority wage is a pivotal personnel system in the Japanese employment practices, alongside long-term employment and enterprise unionism. In the early 1990s, after the collapse of the bubble economy and as the recession lengthened, Japanese companies adopted performance-based personnel systems. Changes in the wage system under the slogan of transition from seniority to performance created a wage system for work (shigoto), a role-based or job-based rather than job competence wage. According to government statistics, as of 2012, around sixty percent of large enterprises with 1,000 or more employees had introduced achievement and performance as determinant factors of base salaries. The proportion of companies that base salaries on such factors as job or role is now around seventy percent. The purpose of this paper is to investigate the changes and characteristics of the wage system caused by the introduction of an American-style performance-based personnel and wage system. To this end, I examine the background of its introduction and aspects of development of the performance-based personnel and wage system, and show how they have formed a new internal rank system based on results. The establishment and characteristics of pay for accountability (role-based pay) as a new wage system to replace the job competence wage are discussed, giving special attention to the Japanese-style division of labor within the workplace.