Job Security in Japan: Is Lifetime Employment on the Way Out?

Japanese labor markets provide a stark illustration of how varied labor practices can be in other industrialized nations, as well as some dangers in attempting to enhance employment stability.

Since the 1950s, Japan’s labor markets have been characterized by several distinctive features. Perhaps the most notable among them is “lifetime employment,” the practice at large firms of hiring workers directly out of school and retaining them until a mandatory retirement age (originally age 55, now around 60 for most companies). The lifetime guarantee is implicit, with no written contracts, but real nevertheless and estimated to cover about a third of all workers. Rather than hiring midcareer managers or blue-collar workers from the outside, firms promote exclusively from within.