Lifetime Employment in Japan

Paper Summary:

In a 'Columbia Law Review' article published in 1999 -- "Lifetime Employment: Labor Peace and the Evolution of Japanese Corporate Governance" -- authors Gilson and Roe maintain that the Japanese practice of constricting the external labor market is responsible for firms' willingness to invest in human capital. They specifically reject the proposition that Japan's institution of lifetime employment could be the impetus for such corporate outlay. This paper contends, however, that social norms, coupled with a divergent development of Japan's employment law, gave rise to its lifetime employment policy and that this resulting policy accounts for employers' willingness to invest in human capital. The paper argues that a closed market is the result -- not the cause -- of corporate investment in employees.

From the Paper:

"It is recognized that Japanese labor law theory is firmly established in that of the Weimar Republic, which gave preference to group interests over that of the individual. The theory began to evolve during Japan's first industrialization at the end of the 19th century, when a severe shortage of skilled labor fostered worker migration from company to company. The situation was exacerbated when, in the 1920s, Japan underwent a series of hostile, chaotic strikes, which further caused significant labor turnover in key industries."

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