Human Resource Management

Series: Japan’s Employment System and Public Policy

Labor-Management Relations
Labor Market, and Labor Administrationand Legislation

This series systematically outlines the basis of labor situations and analysis in Japan.

Will the Japanese Long-Term Employment System
Continue to be Maintained?

FUJIMOTO Makoto
I. Length of employee tenure in Japan
By international standards, employee tenure
tends to be longer in Japan. Table 1 shows the ratios
of workers by years of employee tenure between
2020 and 2022 in Japan, South Korea, the UnitedStates, and European countries. The ratio of workers
consecutively employed for ten years or more in
Japan is 46.8%, the second highest following theratio in Italy (48.6%). The ratio exceeds 40% is only
in four countries other than Japan.
According to the Ministry of Health, Labour andWelfare (MHLW)’s Basic Survey on Wage Structure(2022), the average employee tenure of Japanese
workers as a whole is 12.3 years. Of course, thisdepends on the attributes of workers and the corporate

organizations to which they belong. Comparing maleand female workers, average tenure tends to belonger for males, and to be longer if their company islarger in scale (Table 2). The characteristic ofJapanese workers in global terms, i.e., longer tenure,appears particularly pronounced among maleworkers employed by large corporations.
Compared with 2016, the average years of
employee tenure in Japan as a whole increased by 0.4
years. The average tenure also increased for allgroups by corporate scale, and gender. Japanese
workers’ tendency to work longer for the same
employer has further intensified overall in these few
years, irrespective of gender or corporate scale whencompared internationally.

ファイル名： 20231110長期雇用システム図表.xlsx
Table
シート名： 1.
表１Ratios(en)_ho0202of workers by years of employee tenureless than 1 year

2021
JPN 1)
USA 2)

7.3
24.3
less than 1 month

USA 3)

CAN
UK
DEU
FRA
ITA
NLD
BEL
DNK
SWE
FIN
NOR
ESP
KOR

－
－
1.3
1.6
2.2
1.6
2.3
1.6
2.2
2.1
3.0
0.5
2.6
6.5

1-2
14.8
10.9
1-5
13.0
11.0
8.3
6.4
7.6
6.6
10.0
6.3
10.0
8.9
11.0
6.3
9.2
14.1

3-4

5-9

11.7
17.9

19.4
19.9

6-11months

1-2years

9.2
8.2
6.2
7.2
7.0
5.0
9.0
5.9
9.8
7.9
8.6
7.7
7.0
10.5

12.7
20.7
21.0

21.3

10-14

15-19

14.1
9.7
3-4

10.1
6.4
5-9

17.8
13.1
14.8
45.6
40.7
38.3
47.2
42.9
52.2
51.3
45.7
54.4
39.1
11.5

19.3
17.0
17.8

14.9

データブック国際労働比較2023

20 or more years

22.6
10.8

%

JPN

USA

10 or more years

28.0
30.0
30.6
39.2
42.6
48.6
31.4
43.3
25.8
29.8
31.7
31.1
42.1
21.3

USA

CAN
UK

DEU
FRA
ITA

NLD
BEL

DNK
SWE
FIN

NOR
ESP

KOR

Sources: Data from Ministry of Health, Labour and Welfare, Basic Survey on Wage Structure, 2021 (March 2022); U. S. Bureau of Labor
Statistics, “Employee Tenure in 2022” (September 2022); and OECD Database (https://stats.oecd.org/), “Employment by job tenure intervals” (asof October 2022).
Notes: 1) Targeting regular workers employed by private companies as of the end of June 2021, excluding part-time workers; calculated by JILPT;
2) As of January 2022. The data for one year or more but less than three years is calculated by JILPT; and 3) Data for 2020 provided by OECD.

Japan Labor Issues, vol.8, no.47, Spring 2024

57

Table 2. Average years of employee tenure (by gender and corporate scale)2016
All companies
1,000 employees or more
100–999 employees
10–99 employees
2022
All companies
1,000 employees or more
100–999 employees
10–99 employees

All workers
11.9
13.6
11.4
10.4

Male workers
13.3
15.4
12.7
11.2

Female workers
9.3
10.0
9.0
8.8

All workers
12.3
13.9
12.0
11.1

Male workers
13.7
15.8
13.4
12.0

Female workers
9.8
10.5
9.6
9.4

Source: Ministry of Health, Labour and Welfare, Basic Survey on Wage Structure (2016 and 2022).

II. Why is employee tenure in Japan solong?
Why then do Japanese workers tend to work
longer for the same employer? It could be because of
the long-term employment system established by
Japanese companies. This system in Japanesecompanies has the primary aims of (1) guaranteeing
the long-term livelihoods of employees (regular
employees), and (2) developing employees’ skills
over the long term (Inagami 1999). Guarantees oflong-term livelihoods are achieved by two elements;
namely practicing stable long-term employment withnormative frameworks (i.e., new graduate recruits
and young mid-career recruits have to be continuously
employed until mandatory retirement age) andseniority-based pay structures that provide standard
living expenses commensurate with employees’ life
cycle stages (a system in which wages rise withincreasing age and increasing years of continuous
employment).
On the other hand, of the two elements thatguarantee livelihoods, the seniority-based wage
system also reflects employees’ long-term skills
development, achieved as a result of OJT (on-the-job
training) during day-to-day work and the motivating
function of a competitive relationship among
employees. Many Japanese companies recruit new
employees mainly from young people who have justgraduated from school (new school graduates). Thistendency is prominent among large corporations.

58

Japan Labor Issues, vol.8, no.47, Spring 2024

Until they are hired, these graduates have noexperience of regular employment in a company, andso it is not known what sort of job skills they might
have. When hiring new recruits, therefore, companies
are primarily interested in their trainability after
hiring, on the assumption that job skills will improveas they accumulate experience of working inside thecompany. Based on this assumption, many companies
form their pay structures with wages gradually
increasing as continuous employment is accumulated.
The long-term employment system of Japanesecompanies and the long tenure of Japanese employees
seem to have been achieved based on the intentionsof both employers and employees. Specifically,
companies need to recoup the investment made in
hiring new school graduates and giving them various
education and training opportunities designed toboost job skills after hiring them. To achieve this,
employees who have acquired a certain level of job
skills should ideally work for as long as possible, andthe period during which their productivity is greaterthan the wages they receive should also be as long as
possible. Therefore, companies try to raise workers’
motivation to stay in the workplace by increasing
wages in line with continuous employment. For theemployees, meanwhile, if the company adopts awage structure that places emphasis on long-term
continuous employment, the longer they work
consecutively for the same company, the higher thewage they can expect to receive. In addition,
employees’ motivation to remain in long-term

continuous employment is further boosted by the factthat in order to retain employees, many companies
adopt a structure in which employee incentives otherthan regular wages, such as retirement benefit,
become more advantageous as their length of
employment increases. The aim of this is to encourage
employee loyalty.

III. Will the long-term employment systemchange?
Will the long-term employment system adopted
by many Japanese companies continue to be
maintained in the future as it has been so far?
Enterprise surveys, such as the Japan Institute forLabour Policy and Training (JILPT)’s “Survey on
Challenges in Career Formation and Employment
Management in the 100-year-life Era” conducted in2020 (JILPT 2020) and thereafter, reveal that around80–90% of large- and medium-sized Japanese
corporations want to maintain long-term stable
employment for as many regular employees as
possible in the future. This situation has remained
unchanged since before 2010 or even before that
(See Fujimoto 2017).
However, the seniority-based wage system
practiced by many Japanese companies in tandemwith the long-term employment of their employees—
an important element in achieving long-term
livelihood guarantees for those employees—has theinherent risk that companies pay wages exceeding
the productivity of workers whose job skill
development has reached its limit. This kind of risk
did not surface during the 1950s to 1970s, when
Japanese companies were enjoying rapid growth. But
from the second half of the 1970s, when the Japanese
economy stopped growing as robustly as before,
companies increasingly saw the high cost of middleaged and older workers’ wages as problematic.
Particularly among large corporations, this triggered
the spread of shukkō, or temporary transfer to anothercompany while maintaining the employment
relationship with the original company, and tenseki,or moving out to another company withoutmaintaining the employment relationship with theoriginal company, known as personnel management
practices whereby companies transferred or relocatedtheir own middle-aged and older workers to business
partners or subsidiaries. During the long recession in
the 1990s, moreover, a succession of companies
experienced serious business downturns. Many ofthese started practicing “solicitation for voluntary
early retirement” (sōki taishoku boshū), whereby
employees over a certain age (usually those in theirlate 40s to 50s) were offered to retire voluntarily in
exchange for add-ons to their retirement pay, or otherrewards.
As personnel measures designed to force middleaged and older workers away from companies(whether by shukkō, tenseki or solicitation forvoluntary early retirement) become established, it ispossible that the tendency toward long tenures seenin Japanese workers will gradually weaken. In fact,
the average tenures of university or postgraduate
degree-holding male employees in their early 50s are
tending to become shorter in large corporations (with1,000 employees or more), albeit gradually (from25.3 years in 2006 to 24.6 years in 2016).
In addition, given the increasingly fierce global
competition coupled with the aging and declining
population, companies find it harder to makeprojections of growth. This is making it harder forthem to maintain an organizational structure whereby
many employees can be guaranteed a career rising toa certain managerial level (such as section manager).
According to the Basic Survey on Wage Structure, of
employees with university degrees, the proportion of
those serving as section managers in their early 40s
fell from 32.3% in 1990 to 16.5% in 2021. Although
the aforementioned systems of seniority-based wages
are still being maintained by Japanese companies,
moves to change these systems have become
conspicuous since the beginning of the 2000s. During
the ten years since 2010, the tendency of wages toincrease with age became weaker year by year
(Figure 1). “General Survey on Working Conditions”(MHLW 2022) reveals that 40.4% of companies had
revised their wage systems during the period between
2019 and 2021. The content of revisions was “toexpand the wage portion corresponding to job

Japan Labor Issues, vol.8, no.47, Spring 2024

59

200
190
180
170
160
150
140
130
120
110
100

Age 20–24

25–29

30–34

35–39

2010

40–44
2015

45–49

50–54

55–59

2020

Source: Ministry of Health, Labour and Welfare, Basic Survey on Wage Structure (2016).
Note: The average salary for official work hours among ordinary workers aged 20–24 at private companies with ten employees
or more = 100.

Figure 1. Situation of wages by age groupcontent, such as work duties or job type,” “to expand
the wage portion corresponding to ability to perform
work duties,” or “to expand the wage portion
corresponding to performance and results,” among
others. In other words, the aim is often to reflect thejob performance or job content more closely in thewage, irrespective of age or years of continuous
employment.
Thus, as levels of livelihood and career guarantees
under long-term employment gradually diminish,
employees who want to stay in their current place ofwork and commit to it are not the overwhelming
majority as they had been before. According to the“Survey on the Current Situation and Challenges of
Human Resources Development and Skills
Development” conducted by JILPT in 2020 (JILPT2021), in response to the question asking regular
employees working for companies with 300
employees or more about their career perspective,
18.4% answered that they would become department
or section managers or hold higher positions in thesame company and 27.3% answered that they would
become an expert for their job in the same company;
the respondents who gave these answers were lessthan 50% of the total.
Some companies are exploring and promoting an
employment practice that is different from long-term
employment in terms of utilization of human60Japan Labor Issues, vol.8, no.47, Spring 2024

resources and career formation. The concept of“human capital management,” advocated actively by
the Ministry of Economy, Trade and Industry since
the beginning of the 2020s, recommends a shift fromthe relationship in which companies and employees
are dependent on each other by means of the longterm employment system and the seniority-based
wage structure to a relationship in which companies
and individuals choose each other. In addition,around 2000, the Japan Business Federation(Keidanren) and other employers’ associations
initiated the idea of “self-regulated career
management,” which considers it ideal for individuals
to work on career development and continuous
learning by themselves, without relying on theircompany, in the rapidly changing environment. In
recent years, there are moves mainly among large
companies toward restructuring their systems forskills development and career formation based on
this idea.

IV. Shortage in labor supply due topopulation decline and aging, andpromotion of longer-term continuous
employment
Despite the intentions and actions of employers
and employees that imply the decadence of the long-term employment system as discussed above,
workers tend to work for the same employer for alonger term in recent years. This may be largely due
to the declining birthrate and population aging thatare ongoing in Japanese society, the accompanying
decline in working-age population, and the forecastof a shortage in labor supply.
Against the background of the declining birthrate
and population aging, the total population of Japan
started to decline after peaking at 128.08 million in
2018, but the working-age population aged between
15 and 64 peaked in 1995, more than 20 years earlier
than the total population. The working-age populationin 2021 was 74.5 million, about 12.5 million fewer
than the figure when it peaked at 87.26 million. The
working-age population is projected to continue todecline, with nearly 15 million fewer in 2040 than in
2021. Amid this situation, companies started to giveconsideration to the retention of their employees inorder to prevent the shortage in labor supply frombecoming more serious. As a result, workers tend towork for the same employer for a longer term than
before.
Furthermore, there was concern about whether
the pension system can survive amid the declining
birthrate and population aging, and to address thissituation, the policy to request companies to continue
employing workers until they reach old age wascarried out in the past decade or so. This may also be
the cause of longer-term continuous employment.
The starting age for public pension payments has
been gradually raised from 60 since 2001, and thegovernment has been urging companies to continue
employing workers past 60 which is the typicalmandatory retirement age. An amendment to the Act
on Stabilization of Employment of Elderly Persons
made it compulsory for companies to secure
employment opportunities for workers who wish tocontinue working after 60 up to the starting age forpublic pension payments, with effect from April
2006. In April 2013, the starting age for public
pension payments was further raised to the age of 65,
which is the government’s target level. As of 2024,
companies are obliged to employ all workers whowish to remain in employment up to age 65.

There are three methods for implementing
measures to secure continuous employment until theage of 65: (1) abolishing the mandatory retirementage; (2) raising the mandatory retirement age; and (3)introducing systems for continuing to employ
workers after they reach the age of 60 (i.e.,
employment extension and re-employment).
According to “Age of the 100-Year Life: Current
State of Employment Measures for the Elderly”(MHLW 2023), 99.9% of companies with 21
employees or more implemented measures to securecontinuous employment until the age of 65; of thesecompanies, 3.9% abolished the mandatory retirementage, 22.5% raised the mandatory retirement age, and70.6% introduced the continued employment system.
In recent years, more companies raised the mandatory
retirement age from 60 to 65. Thus, as almost allcompanies implement measures to secure continued
employment until the age of 65, the majority ofworkers now continue to work for the same employer
beyond the mandatory retirement age of 60. Between
June 2021 and May 2022, 87.1% of some 380,000
people who reached the mandatory retirement age of
60 continued to work for their previous employer.

V. Challenges and future of the long-term
employment system
However, there are many challenges to overcome
even if the tendency toward long tenures continues
due to the shortage in labor supply and the long-term
employment system is maintained in the future. The
first challenge relates to continued employment fromthe age of 60, which can be regarded as the major
cause of the continued tendency toward long tenures.
Given the current situation, most workers who
continue to be employed by their previous employer
after reaching the age of 60 receive only about 70 to
80% of the wage they received at the age of 60, while
job content and working hours remain almost
unchanged, and they are generally employed on
fixed-term contracts according to “Survey on
Employment of Older Persons,” an enterprise survey
conducted in 2019 (JILPT 2020). In addition, thepractice whereby managerial personnel leave their

Japan Labor Issues, vol.8, no.47, Spring 2024

61

managerial positions upon reaching a certain age
before 60 (e.g., age of 55 or 58), which is referred toas “age limit system for managerial personnel (oryakushoku-teinen seido),” is becoming popular
mainly among large companies. In view of thecircumstances regarding the treatment of elderly
workers, although policies promoting the employmentof older persons carried out over the last 15 years or
so have led to the development of systems that enable
employees in a company to remain employed longer,
it is less likely that workers will continue to build andleverage their careers in a single company with highmotivation.
Furthermore, how to assign and treat workers
appropriately as necessary for companies in thecourse of utilizing human resources, and how tomotivate workers for skills development and careerformation, which is closely related to their assignment
and treatment, are still challenges for many
companies.
Will the Japanese long-term employment system
be maintained with these challenges remaining andthe tendency toward long tenures continuing, or willa new long-term employment system be created byresponding to these challenges? Or, will an

employment system that is different from the longterm employment system spread gradually? Attention
should be paid to future developments.
References
Fujimoto, Makoto. 2017. “What is Japanese Long-Term
Employment System? Has it Vanished?” Japan Labor
Issues. vol. 1, no. 1, https://www.jil.go.jp/english/jli/
documents/2017/001-06.pdf.
Inagami, Takeshi. 1999. “Nihon no sangyō shakai to rōdō”[Japanese industrial society and labor]. In Kōza shakaigaku
6: Rōdō [Sociology lectures 6: Labor], edited by Takeshi
Inagami, and Takashi Kawakita. Tokyo: University of Tokyo
Press.
JILPT (The Japan Institute for Labour Policy and Training). 2020
“Kōnenreisha no koyō ni kansuru chōsa (kigyō chōsa)”[Survey on Employment of Older Persons (enterprisesurvey)]. JILPT Research Series no. 198.
———. 2020 . “Jinsei 100 nen jidai no kyaria keisei to koyō
kanri no kadai ni kansuru chōsa” [Survey on Challenges in
Career Formation and Employment Management in the
100-year-life Era]. JILPT Research Series no. 206.
———. 2021 . “Jinzai ikusei to nōryoku kaihatsu no genjō tokadai ni kansuru chōsa” [Survey on the Current Situation
and Challenges of Human Resources Development andSkills Development]. JILPT Research Series no. 216.
MHLW (Ministry of Health, Labour and Welfare). 2023. “Age ofthe 100-Year Life: Current State of Employment
Measures for the Elderly.” https://www.mhlw.go.jp/
content/10500000/001086776.pdf.
———. 2022. General Survey on Working Conditions.

FUJIMOTO Makoto
Senior Researcher, The Japan Institute for Labour
Policy and Training. Research interest: Industrial
sociology.
https://www.jil.go.jp/english/profile/fujimoto.html

62Japan Labor Issues, vol.8, no.47, Spring 2024