Discussion Paper No.308
The Effects of Unions on Working Conditionsin Japanese SMEs
Tsukasa Matsuura
Faculty of Economics
Chuo University
March 2019

INSTITUTE OF ECONOMIC RESEARCH
Chuo University
Tokyo, Japan

The Effects of Unions on Working Conditions in Japanese SMEs

Abstract

This study analyzes the effects of unions on normal working hours per week, the average
number of days of paid leave and its use, wage increase, and overtime working hours. I showthat unions lower weekly normal working hours, increase the average days of paid leave, andfacilitate wage increases. However, a positive correlation exists between unions and individuals
who work overtime for more than 60 hours per month. It means that although unions are usefulin improving working conditions, such as normal working hours and wage increases, they are
not effective in the reduction of overtime workings.

Keyword: Union, SMEs, Working conditions, Overtime working
JEL classification code: J51, J53, J31, M54

1

1. Introduction
In the past, unions were the center of industrial relations in Japan as well as in Westerncountries. However, employment relations 1 became informal in light of globalization andservice industrialization. Over the years, employment relations have shifted from being
commonly collective industrial relations where unions are able to negotiate with managers, tohaving an informal human resource management where the employees may directly negotiatewith the managers without mediation. Hence, unions have lost their power. Figure 1 shows thetrend of the unionization rate in Japan. The unionization rate was 25% in 1990 and has
decreased since then, except in 2009 and 2010. It had reached 17% in 2016. Koike (1988)
insisted that unions are significant, since they encourage communication between managers
and employees. Morikawa (2010) examined the effects of unions on labor productivity by using
firm data that described firms that had more than 50 employees. He insisted that althoughseveral studies from the U.S. had shown that unions have a negative effect on firm profitability,
these results cannot exactly be applied nor concluded the same way in Japan. He also discussed
how unionization rate decreases due to the increase in the rate of service industries. This,
however, may not be the sole factor for the decrease in unionization rate. Other elements thatare factored in may also lead to a decrease in unionization rate.
In this study, I reexamine the significance of unions by analyzing the effect of unions on
normal working hours, wages, paid leave, and overtime working hours. Freeman and Medoff(1984) conducted a seminal research that set the ground work for other studies anddevelopments that followed, which, in turn, leaves little room for further analysis on the subject.
2

Nonetheless, there are two reasons why analyses in this field are still significant.
First, most studies on industrial relations mainly focused on large firms, and rarely on therole of unions in SMEs. This is because the unionization rate is usually low in SMEs. Forth etal. (2006) showed that only 3% of all SME workplaces have existing unions, compared with
31% of workplaces in large firms in the UK. It resembles the situation in Japan. There is asignificant difference in the unionization rate between SMEs and large firms (see Table 1).
Thus, a large sample size is necessary to analyze unions in SMEs for precise estimations.
Moreover, researchers might think that since employee relations in large firms may affect theones in SMEs, the analyses of the employee relations in large firms are enough to understandthe comprehensive employee relations in the country. However, the rate of employees in firms
where the total number of employees is more than 1,000 accounts for only 23.8% of theworkforce, as indicated in Table 1. Analyzing only large firms will not provide a comprehensive
understanding of Japanese industrial relations. Therefore, I focus on the area that previous
studies have not investigated, that is, analyzing SMEs that employ a majority of Japanese
workers.
The second important reason to analyze this subject is due to the lack of previous studies
that consider the effects of the unions on two labor conditions separately: unions could either
easily negotiate with managers or not. Examining that unions are useful to decrease working
hours and increase average wage, I will show that they are not effective in decreasing overtime
hours and workload, which need a more efficient and a fair distribution system among
employees in order to adjust the interests among employees. Hence, unions have been replaced3

in both direct and informal negotiations that take place between managers and employees, thus
losing their function as intermediaries. This is one of the reasons for the decrease inunionization rate.

2. Previous Studies
Previous studies typically focus on the effect of unions on employment conditions, which
was one of the central issues in industrial relations. For example, Brunello (1992), Tsuru andRebitzer (1995), Tachibanaki and Noda (2000), and Morikawa (2010) estimated the effects of
the unions on wages, and productivities by using firm based data. Hara and Kawaguchi (2008)
conducted a research by using an individual based data.
Concerning with the effect of unions on working hours, there were only a few studies, asTrejo (1993) pointed out. Trejo (1993) presented that unions lowered 17% of overtime working
hours, using individual data in US. However, the coefficients of unions become insignificant,controlling premium of overtime working. In contrast with Trejo (1993), Bell and Hart (1998)
researched using an individual data in UK and presented that union did not have a significant
effect to decrease overtime working hours. Furthermore, Kalwij and Gregory (2005) used an
individual data in UK and examined that while unions increase in males’ overtime working
hours, they did not have a significant effect in females’. However, the magnitude of thecoefficient are very small.
In contrast with studies focusing on large firms or individuals, there are only a few studies
that have focused on SMEs not only in union analysis but also in the overall field of industrial
4

relations. According to Wilkinson (1999), previous studies on industrial relations in SMEs arepolarized into two groups: the “small is beautiful” and the “bleak house” perspectives. In theformer, the Bolton Committee Report (1971) insisted that small firms facilitate close andharmonious working relationships, while Rainnie (1985) criticized the former by arguing that
small firms are dictatorially run, with employees suffering from poor working conditions.
Several previous studies presented that unions are less frequently formed in SMEs than inlarge firms 2,3 (Bouquin et al., 2007; Forth et al., 2006; Holten and Crouch., 2014; Van Gyes,
2006; Wilkinson, 1999). One of the factors that unions are less formed is because managers areaverse to unions, with it being known to be detrimental to the management. Forth et al. (2006)
presented that managers in SMEs preferred direct communication between managers andemployees, and they had a negative impression toward unions. Marlow (2003) indicated that
93% of managers favored open door policies; they had a policy of “informal discussion andresolution of workplace problems.” Ram et al. (2001) insisted that managers in SMEs may
attempt to eliminate the unions’ voice, considering that unions undermine and disrupt thefamilial atmosphere. Moreover, Van Gyes (2006) compared the country-level differences in
employee representations such as unions and work councils in European countries. He also
showed that the strong adversarial attitude against unions is common among managers in SMEs.
In addition, although working conditions tend to be worse in SMEs, job satisfaction is most of
the time higher, reducing the tendency for employees to organize unions. Wilkinson (1999)
showed that the aversion of managers in SMEs toward unions discourage unions to beorganized. 45

Recently, studies that focus on the effects of unions have been accumulated, considering
the change in trend from the collective voice that empowers unions, to the direct voice thatcourses through between managers and employees. Bryson (2004) examined the proposition
that union voice was more effective to encourage fair treatment than direct voice, although hecould not obtain a significant result. Bryson et al. (2013) analyzed the effects of the direct nonunion voice versus the collective union voice on the work outcomes such as turnover rate, laborproductivities, and financial performances. Their results indicated that the coexistence of thedirect non-union voice and the collective union voice, which was labeled as the “dual-system,”
was better than non-union only regimes. Pohler and Luchak (2014) examined whether highinvolvement work practices (HIWPs) are a substitute for unions, and they reported that job
satisfaction is maximized under the combination of unions and HIWPs; they even added thatthe latter complemented with unions.
Previous studies have revealed the following: Few studies focused on the effect of unions
on labor conditions in SMEs, since unions are formed less in SMEs than in large firms in
Western countries as well as in Japan. One of the reasons why unions are less formed in SMEs
is the aversion of managers toward unions. Furthermore, recent works in this field showed thatmanagers prefer direct communication with employees rather than the negotiation with a union.
Some studies also examined whether non-union voices such as HIWPs can substitute for unions.
I examine the effects of unions on employment conditions in Japanese SMEs. I also divide
the employment conditions into whether uniform improvements are possible or not, showing
how flexible unions can deal with the problems, which are necessary to improve business6

operations while considering the workers’ best interests to efficiently allocate workload.

3. Industrial relations in Japan
The previous section discussed that managers in Western SMEs are adversarial to unions
because they cause interruptions in their management, so they prefer an informal and more
direct communication between managers and employees. However, caution should be
exercised in applying this approach in the context of Japanese industrial relations because thefirms themselves organize Japanese unions. This means that unions are not treated as outsiders
to the firms. Aoki et al. (1997) presented that in the absence of corporate control through theactive market, managers can maintain a long lasting harmonious relationship with employees,
which enhances labor productivity. Moreover, in Japan, many department heads, board
members, and even some presidents, have not only been union members in the past but havealso played important and active roles in these organizations (Jacoby, 2005). Thus, even though
unions are not favored in Western countries owing to its nature to interrupt management, it may
not be directly applied to Japan.
Behind the harmonious labor-management relationship in Japan, previous studies havebeen conducted to examine the hypothesis that unions facilitate the communications between
managers and employees and are able to reallocate labor force efficiently, which contributes toenhancing labor productivity. Koike (1988) and Kato and Morishima (2002) discussed that
unions are significant in facilitating the communication between managers and employees.
Morikawa (2010) showed that the presence of unions has significant positive effects on
7

productivity and wage.
However, as these researchers conducted studies using mainly large firms, it was difficult
to apply their conclusions to SMEs directly. In Japan, since the employment conditions andcustoms in SMEs are sometimes influenced by large firms, we may understand thecomprehensive industrial relations in Japan by focusing on large firms. However, theunionization rate is decreasing and prominently low in Japanese SMEs. This trend is generally
explained by external causes such as an increase in the number of part-time job workers due toservice industrialization, and very few studies attribute to problems inherent in unions. Only
external causes cannot sufficiently explain the reasons for the decrease in the unionization rate.
Thus, by focusing on Japanese SMEs, I will examine the significance of unions by clarifying
what kinds of employment conditions unions can improve.

4. DataHere, I explain the data, definitions of variables, and descriptive statistics. I use the datafrom “The Survey on Labor Situation of SMEs”5 conducted by National Federation of Small
Business Associations (Chuo-Kai) in 2013 and 2016. These surveys aim at firms that have lessthan 300 employees (less than 100 employees in wholesale and service industries, less than 50
employees in retail). In 2013, the number of targeted firms was 40,606, out of which the numberof respondents was 19,091 (the ratio of valid responses: 47.0%). In 2016, the number oftargeted firms was 40,846, while the number of respondents was 18,873 (the ratio of valid
responses: 46.2%). Since the ratio of valid responses is nearly 50%, the data are trustworthy.
8

As aforementioned, since unions are less organized in SMEs, a sufficient sample size isnecessary to analyze unions in SMEs.
Next, I explain the model used for estimating the effects of unions on employment
conditions as follows:y i =β 0 + β 1 union i + β 2 X i + β 3 industry dummy + β 4 district dummy + u i(1)where yi represents the outcome variables; for outcome variables, I use normal working hours,
the average days of paid leave and its use per employee, wage rise, monthly overtime working
hours per employee, and the rate of employees who work overtime for more than 45 and 60
hours per month. 6 X i is a vector of explanatory variables, which consist of the number ofregular employees (female and male), state of management, plans to extend business, problems
in management, and plans to hire new employees. In addition, I use regional and industrial
dummies, as well as clustered robust standard errors, considering the correlation amongindustries.
Table 2 shows the descriptive statistics. The values of union firms are significantly higher
than those of non-union firms in terms of normal working hours, paid leave, and wage risedummy. The values of union firms are also higher than those of non-union firms in terms ofmonthly overtime working hours and the rate of employees who work overtime for more than
45 and 60 hours per month. These are the results of only t-test, not considering that the overtime
9

working hours may be longer in large firms, and the inverse causality that unions might beorganized in firms where employees often have to work overtime. In the following analyses, I
show estimates considering these possibilities.

5. Results
5.1. Effects of unions on normal working hours, paid leave, and wage increase
Here, I estimate the effects of unions on employment conditions. Table 3 shows the effectof the existence of unions on weekly normal working hours. The coefficients of unions are
significantly negative, indicating that unions lower weekly normal working hours by 0.33
working hours per week. It is robust to estimations, as columns [1]–[3] show. Table 4 shows
the results of paid leave. Columns [1]–[3] show the results of the given days of paid leave,
while [4]–[6] show the results of the used days of paid leave. The coefficients of unions are
positively significant in all columns. Unions lower 0.80–0.86 days in the given paid leave,
while 0.68–0.73 days in the use of paid leave. Furthermore, Table 5 shows the effects of unions
on wage. The coefficients of unions are positively significant in all columns. This indicates that
unions increase the possibility of a rise in employee wages by 13%–15%.
In short, unions lower weekly normal working hours, increasing the given and the useddays of paid leave and wage. As these results are consistent with that of Freeman and Medoff(1984), the effects of unions in the case of Japanese SMEs is confirmed.

5.2. Effects of unions on overtime working hours
10

Next, I examine the effects of unions on overtime working hours. Since 20% of all thefirms have zero overtime working hours, I used Tobit model to deal with censored problems;
columns [1] and [2] of Table 6 show the results. The coefficient of σ is significant, which
implies that the Tobit estimation is appropriate. Although not significant, the coefficients ofunions are positive, indicating that unions encourage employees to work overtime, which
contrasts with the result Trejo (1993) showed.
The above result signals the problem of endogeneity due to inverse causality, which
implies that those firms who allow employees to work overtime longer tend to have unions. To
deal with this endogeneity problem, I used an instrumental variable (IV) method using the 2013
data. The IVs were obtained via a questionnaire involving how older workers are hired and aquestionnaire on the voter ratio of proportional representation by regions either in the 2009
house of representative elections and in the 2010 house of councilor elections. The
questionnaire indicating how the elderly are hired had the choices of the elderly being directly
introduced from a business partner, a parent firm, or through a public employment service.
Binary variables are constructed for each result. 7 The reason for using these variables as
instruments is because those who are hired this way may have already had a knowledge ofunions where they worked before, and so they too facilitate the formation of unions. However,there is no direct relationship between the way they are hired and the overtime working hours.
The reason for using the ratio of voters for pro-labor parties such as Democratic Party, Social
Democratic Party, and Communist Party is that the higher voting rates would lead to more
representatives. The existence of representatives in the areas facilitates the formation of unions.
11Furthermore, the regions where electorates vote for these parties may have an inclination
toward unions.
Columns [3]–[5] of Table 6 show the results of the IV estimation. Column [3] is the resultof using all nine instruments. The Hansen’s J statistic for over identification is not significant,accepting the null hypothesis that all of the instruments are exogenous. The coefficients ofunions became negative after dealing with the endogeneity, and this is supported by previous
studies. However, the Kleibergen-Paap Wald F statistic is less than 10, suggesting that it might
have the problem of weak instruments, which requires caution to interpret the results. To deal
with weak instruments, I choose instruments for F values to be higher, considering the problemof over identification. Column [4] is the result with regional voting rates as instruments.
Although the F value became higher, the coefficient of unions decreased and became
significant only at the 10% level. Column [5] is the result of using the regional voting rates ofSocial Democratic Party and Communist Party as instruments. Although the F value became
9.67 (i.e., close to 10), the coefficient is not significant.
These results show that if I consider an inverse causality that longer overtime working
may facilitate the formation of unions, the positive relationship between unions and overtime
working disappears. However, I could not show that unions may decrease overtime workings.

5.3. Effects of unions in improving overtime working
As aforementioned, there is a positive correlation between unions and overtime working
hours. Considering the endogeneity, I cannot show a robust result that unions lower overtime
12

working hours. However, even if unions cannot decrease overtime hours on average, they might
be effective in decreasing extreme overtime workload.
Therefore, I use dependent variables as how often firms have employees who workovertime more than 45 and 60 hours per month. The answer choices are “1. Almost every
month, 2. About once every three months, 3. Rarely, 4. Not at all.” A higher value implies lower
overtime working hours. Columns [1] and [2] of Table 7 show the results. The coefficients ofunions are negative, but not significant for both equations. In other words, unions in firms arecorrelated with those firms which have employees whose overtime working hours are morethan 45 and 60 hours (p values: 0.11 and 0.12). It implies that unions do not improve extreme
overtime working hours. Furthermore, I estimate by using binary variables whether firms have
employees who work overtime for 45 and 60 hours almost every month. Columns [3] and [4]show the results; column [4] shows that unions are positively correlated with firms that have
employees working more than 60 hours overtime. Thus, unions might be correlated withextreme overtime workers whose overtime exceed more than 60 hours almost every month.
These results may also have the endogeneity problem in that employees who work
excessive overtime might facilitate unions. To deal with this problem, I examine the effects ofunions on firms’ initiative to reduce overtime working via a questionnaire using the 2013 data.
For the estimation, I use the following question: “Is your firm tackling to reduce overtime
work?” The responses are “1. We are tackling positively, 2. We are tackling to some extent, 3.
We are not tackling, 4. No overtime work.” I exclude “4. No overtime work” from estimations
and use an ordered probit model. The results are shown in columns [5], [6], and [7]. The
13

coefficients of unions are not significant, although negative. Thus, I conclude that unions are
not effective to reduce overtime working.

6. Discussion
The results from the previous sections show that, on the one hand, unions lower normal
working hours, increase the given days of paid leave and its use, and facilitate wage rise. On
the other hand, unions are positively correlated with overtime working hours, even after adding
control variables, although their coefficients are not significant. In other words, I could notshow that unions lower overtime working hours, even after using IV method to control for theendogeneity problem. Moreover, unions are positively correlated with those who work 60 hours
overtime, and are not effective to reduce of overtime working hours in firms. Thus, the effects
of unions are quite different on normal working hours, paid leave, wage increase, and overtime
working hours.
I present three reasons for the above results. First, since employees can share the sameinterests in improving normal working hours, paid leave, and wage increase, they can cooperatewith each other to demand from managers. However, this cannot be applied to overtime work.
Since SMEs in Japan take on many jobs as subcontractors from large firms, they cannot adjust
their burden by themselves, being impeded by the amount of their workload. It is necessary toadjust the interests among employees to reduce some of employees’ overtime working hours.
Although unions are effective to demand from managers to improve their working conditions
uniformly, they are not effective to manage the interests among employees. As Ram et al.
14(2001) point out, since SMEs are more flexible to change working hours by personal reasons
than large firms are, they can resolve the problem of working hours without unions. Previous
studies also suggest that due to the decrease in unions’ influence, employment relations havechanged from industrial relations to human resource management. Unions also cannot
sufficiently respond to personal interests among employees in Japanese SMEs.
Second, in Japan, unions mainly aim to protect stable employment and may not
sufficiently focus on reducing overtime working. Labor costs consist of the product of hourly
wage, numbers of employees, and working hours. The adjustment of labor costs needs tochange in any of these three factors. In Japan, managers adjust working hours to protect
employment, and unions also implicitly admire this adjustment. Furthermore, job descriptions
are not rigid and managers’ discretionary power to assign employees in jobs and the places
where employees work is admired widely in Japan. However, it is difficult for managers to fire
employees because of losing their tasks. Unions also implicitly admire the flexible job
descriptions and longer overtime working hours to ensure a stable employment.
Third, according to Article 36 of Labor Standards Act, an employer can enter into a writtenagreement either with a labor union organized by a majority of workers at the workplace orwith a person representing a majority of workers. It means that if there is a union comprising amajority of workers, managers can easily enter into an agreement with the union, which may
facilitate overtime working.

7. Conclusion
15

In summary, unions are effective to decrease normal working hours, increase the given
days of paid leave and its use, and increase wage. These results are more or less consistent withprevious studies that mainly analyzed large firms. However, I could not confirm that unions
improve overtime working hours. Some estimations show that unions are positively correlatedwith longer overtime working hours.
The contributions of this study are as follows. First, few previous studies analyzed theeffects of unions on working hours in SMEs, while many studies analyzed the effects of unions
on wages and productivities in large firms or using an individual data. This article indicatesthat unions do not have a significant effect to decrease overtime working hours in Japanese
SMEs.
Second, the reason for lower unionization rate is considered to be the increasing share of
employees who work in service industries and part-time workers who do not tend to participate
in unions. However, besides this reason, I examined that behind the changing employment
relations from collective industrial relations to informal human resource management, unions
cannot respond to adjust the interests among employees, which may be the inherent reason why
unionization is decreasing. This study also shows that unions facilitate wage increase. Since itis difficult for firms to increase wage without improving productivity, I will not deny theimportance of unions’ communication between managers and employees (see Koike, 1988;
Kato and Morishima, 2002; and Morikawa 2010).
Third, as the Japanese government is currently promoting “work-life balance” and istrying to make reforms to reduce overtime working, this has become an important issue in
16

Japan. Thus, the results that unions in SMEs cannot sufficiently deal with this problem have apolicy implication to reduce overtime working.
This paper has also limitations as follows. First, it is useful to analyze in terms of large
firms to confirm whether these results can be applied in large firms. One of the reasons why
unions are not effective in reducing overtime working is that SMEs cannot reallocate their jobs,
as their jobs are fixed and different from large firms. Second, it is useful to focus on differencesin firm ownership structure such as family and non-family firms. Third, although I use the IV
method to deal with the endogeneity caused by inverse causality, it may not be adequate. These
are some of the challenges for future research.

REFERENCES

Aoki, Masahiko., Kim, Hyung-Ki., and Okuno-Fujiwara, Masahiro. 1997. The Role ofGovernment in East Asian Economic Development: Comparative Institutional Analysis,
Oxford: Clarendon Press.
Bell, David. N.F and Hart, Robert. A. 1998 “Working time in Great Britain, 1975-1994”
Journal of the Royal Statistical Society. Series A Vol.161, pp. 327-348
Bolton Committee Report. 1971. Report of the Commission of Inquiry on Small Firms,
chaired by J.E. Bolton, Cmnd 4811, HMSO, London.
Bouquin, Stephen., Leonardi, Salvo., and Moore Sian. 2007. Employee representation andvoice in small and medium-sized enterprises. An introduction to the SMALL project.
17In: SMALL: Representation and Voice in Small and Medium Sized EuropeanEnterprises: Monitoring Actors, Labour Organisations and Legal Frameworks. 5th
Framework Programme, pp. 19–28.
Brunello, Giorgio. 1992. “The Effect of Unions on Firm Performance in Japanese
Manufacturing.” Industrial and Labor Relations Reviews vol. 45(3): 471-487,
Bryson, Alex. 2004. “Managerial responsiveness to union and non-union worker voice in
Britain.” Industrial Relations: A Journal of Economy and Society Vol. 43, No. 1, 213241
Bryson, Alex., Willman, Paul., Gomez, Rafael., and Kretschmer, Tobias. 2013. “TheComparative Advantage of Non-Union Voice in Britain, 1980-2004.” Industrial
Relations: A Journal of Economy and Society 52, S1: 194-220
Forth, John., Bewley, Helen., and Bryson, Alex. 2006. Small and Medium-sized Enterprises:
Findings from the 2004 Workplace Employment Relations Survey, London: ESRC,ACAS and PSI.
Freeman, Richard. B. and Medoff, James. 1984. What do Unions do?, New York: Basic
Books.
Hara, Hiromi., and Kawaguchi, Daiji. 2008. “The union wage effect in Japan.” Industrial
Relations: A Journal of Economy and Society 47(4): 569–590.
Holten, Ann-Louise, and Crouch, Colin. 2014. “Unions in small and medium-sizedenterprises: A family factor perspective.” European Journal of Industrial Relations
20(3): 273–290.
18

Kato, Takao. and Morishima, Motohiko.2002. “The productivity effects of participatory
employment practices: Evidence from new Japanese panel data.” Industrial Relations:
A Journal of Economy and Society 41 (4): 487-520.
Kirton, Gill. and Read, Ian. 2007. Inequalities in Europe’s SMEs: The Challenges for a tradeunion agenda. SMALL: Representation and Voice in Small and Medium Sized
European Enterprises: Monitor Actors, Labour Organization and Legal Framework
Programme, pp. 100-110.
Jacoby, Sanford. M. 2005. The Embedded Corporation: Corporate Governance and
Employment Relations in Japan and the United States, Princeton and Oxford: Princeton
University Press.
Kalwij, Adriaan S. and Gregory, Mary. 2005. “A Panel Data Analysis of the Effects of Wages,
Standard Hours and Unionization on Paid Overtime Work in Britain” Journal of theRoyal Statistical Society. Series A Vol.168, No.1, pp.207-231
Koike, Kazuo. 1988. Understanding Industrial Relations in Modern Japan, Houndmills
Basingstoke, Hampshire and London: The Macmillan Press LTD.
Marlow, Susan. 2003. Formality and Informality in Employment Rotations: The Implication
for regulatory Compliance by Smaller Firms. Environment and Planning C: Politics andSpace, Vol.21: 531-547.
Morikawa, Masayuki. 2010. “Labor Unions and Productivity: An Empirical Analysis Using
Japanese Firm-Level Data.” Labour Economics 17(6), pp.1030-1037.
Moule, Chris. 1998. “Regulation of Work in Small Firms: A View from the Inside. Work.”
19

Employment and Society Vol. 12, No. 4 (December): 635-653.
Noda, Tomohiko., and Hirano, Daisuke. 2013. “Enterprise unions and downsizing in Japan
before and after 1997.” Journal of the Japanese and International Economies 28: 91118
Ram, Monder. , Edwards, Paul. , Gilman, Mark., and Arrowsmith, James. 2001. “The
Dynamics of Informality: Employment Relations in Small Firms and the Effects ofRegulatory Change.” Work Employment and Society 15(4): 845-861.
Rainnie, Al. 1989. Industrial Relations in Small Firms: Small isn’t Beautiful, London:
Routledge.
Pohler, Dionne. and Luchak, Andrew.A.2014. “Balancing Efficiency, Equity, and Voice: The
Impact of Unions and High-Involvement Work Practices on Work Outcomes.” Industrial
and Labor Relations Reviews 67(4): 1063-1094.
Tachibanaki, Toshiaki., and Noda, Tomohiko. 2000. The Economic Effects of Trade Unions inJapan, London: Macmillan Press Ltd.
Trejo, Stephen. J. 1993. “Overtime pay, overtime hours, and labor unions.” Journal of Labor.
Economics, 11, pp.253-278.
Tsuru, Tsuyoshi. and Rebitzer, James. B. 1995. “The Limits of Enterprise Unionism: Prospects
for Continuing Union Decline in Japan.” British Journal of Industrial Relations 33(3),September, pp. 459-492.
Van Gyes. G. 2006. Industrial Relations in Europe 2006 Luxembourg: European Commission.
Wilkinson, Adrian. 1999. “Employment Relations in SMEs.” Employee Relations Vol. 21,
No. 3:206-217.
20

Figure 1

The trend of the unionization rate in Japan
30.0

14,000,000
The number of unions members

12,000,000

Unionization rate

10,000,000

25.0
20.0

8,000,000

15.0

6,000,000

10.0

4,000,000

5.0

0

0.0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

2,000,000

Source: Ministry of Health, Labor and Welfare, “Overview of labor union basic survey 2016”

Table 1 Unionization ratio by firm size
The numbers of union members
Firm size

year-to-year
differencecomposition

The number of

The estimatedthe employed

unionization rate

1,000 per1,000 per％10,000 per

％

Sum

8,491

87

100

5,234

16.2

More than 1,000 employees

5,517

64

65

1,244

44.3

300 ～

999

1,160

3

13.7

100 ～

299

610

-6

7.2

～

99

196

-5

2.3

Less than 29 employees

28

-1

0.3

Others

981

32

11.6

30

12.2

1,456

2,456

0.9
…

Source: Ministry of Health, Labour and Welfare, “Overview of labor union basic survey 2016”21…

Table 2 Descriptive Statistics

2013

2016

Variable

Mean

SD

Mean

SD

Mean

SD

Mean

SD

Normal working hours

39.06217.1517.906
0.617
16.345
2.692
3.178
1.992
61.75716.732
0.792
2.217
0.344
0.106
0.325
0.145
0.409
0.320

1.497
4.224
4.371
0.486
15.259
1.187
1.079
0.781
55.14422.962
0.191
0.645
0.475
0.308
0.468
0.352
0.492
0.467

39.52415.5547.208
0.383
11.644
3.203
3.611
2.282
23.192
9.867
0.798
2.199
0.284
0.120
0.339
0.131
0.418
0.200

1.441
5.064
4.521
0.486
13.061
1.004
0.762
0.924
29.92917.918
0.228
0.661
0.451
0.325
0.474
0.338
0.493
0.400

39.18816.9228.068
0.676
15.473

1.458
4.341
4.265
0.468
13.32139.46615.4907.262
0.480
12.133

1.484
5.226
4.502
0.500
13.77958.657
16.549
0.783
2.145
0.343
0.284
0.518
0.154
0.364
0.405

55.08722.601
0.199
0.657
0.475
0.451
0.500
0.361
0.482
0.491

22.556
9.743
0.795
2.161
0.311
0.272
0.470
0.162
0.349
0.254

29.942
18.135
0.228
0.650
0.463
0.445
0.499
0.368
0.477
0.436

Paid leave
The use of paid leave
Wage rise dummy
Monthly overtime working hours
Rate of more than 45 overtime working hours
Rate of more than 60 overtime working hours
The Plan for the overtime reduction
Regular employee (Male)
Regular employee (Feale)
Ratio of regular employees
State of managements
Plans to extend business
Problems scant of labor quantities
Problems scant of labor qualities
Problems excess of labor quantities
Problems harsh competition
Plans to hire new employees
Sample Size

1164

12662

22

1092

13613

Table 3 The determinants of normal working hours[1]
Union dummy
Regular employees Male
Regular employees Female
Regular employee ration
State of management
Plans to extend on business
Problems scant of labor quantities
Problems scant of labor qualities
Problems excess of labor quantities
Problems harsh competition
Plans to hire new employee
Region dummy
Industry dummy
Observations
R-squared

[2]

[3]

-0.33
-0.327-0.327[0.051]** [0.063]** [0.065]**-0.001-0.001-0.001[0.001][0.001][0.001]0.001-0.0010.000[0.001][0.001][0.001]
0.27
0.29
0.307
[0.054]** [0.053]** [0.054]**-0.023-0.026-0.034[0.018][0.017][0.017]+-0.015-0.056-0.06[0.021][0.022]* [0.021]*
0.072
0.143
0.156
[0.024]** [0.033]** [0.031]**
0.014
0.03
0.033
[0.022][0.021][0.020]
0.052
0.079
0.081
[0.037][0.039]+ [0.038]*-0.0090.033
0.042[0.025][0.033][0.035]-0.041-0.052-0.063[0.038][0.045][0.044]
yes
yes
28531
0.03

Note: +p<0.10; *p<0.05; **p<0.01
Cluster robust standard error in parentheses.

23

yes
no
28531
0.02

no
no
28531
0.01

Table 4 The determinants of paid leave

Union dummy
Regular employees Male
Regular employees Female
Regular employee ration
State of management
Plans to extend on business
Problems scant of labor quantities
Problems scant of labor qualities
Problems excess of labor quantities
Problems harsh competition
Normal working hours
Plans to hire new employee

[1]
given

[2]
given

[3]
given

[4]
use

[5]
use

[6]
use

0.796
[0.161]**
0.011[0.002]**0.003[0.004]1.957[0.197]**0.060[0.030]+-0.063[0.082]-0.244[0.066]**-0.208[0.076]*-0.443[0.085]**0.159[0.062]*-0.203[0.028]**0.281[0.165]0.842[0.150]**0.015[0.002]**0.000[0.003]2.120[0.222]**0.076[0.036]+-0.044[0.114]-0.379[0.061]**-0.255[0.094]*-0.557[0.103]**0.073[0.107]-0.227[0.031]**0.227[0.152]0.858[0.151]**
0.015[0.002]**0.000[0.003]2.141[0.215]**0.087[0.036]*-0.043[0.109]-0.393[0.061]**-0.260[0.095]*-0.561[0.103]**0.057[0.105]-0.240[0.031]**
0.247[0.153]0.707[0.157]**0.000[0.002]-0.003[0.003]0.355[0.122]**0.107[0.050]*-0.251[0.075]**-0.188[0.060]**-0.300[0.074]**0.177[0.106]-0.133[0.088]-0.112[0.023]**-0.280[0.089]**0.730[0.161]**
0.003[0.003]-0.006[0.003]+0.500[0.143]**0.109[0.051]*-0.266[0.079]**-0.240[0.099]*-0.298[0.083]**0.113[0.113]-0.272[0.112]*-0.123[0.026]**-0.210[0.113]+0.681[0.163]**0.003[0.003]-0.007[0.003]+0.363[0.139]*0.125[0.052]*-0.253[0.080]**-0.269[0.104]*-0.306[0.083]**0.130[0.118]-0.279[0.116]*-0.130[0.025]**-0.228[0.118]+

yes
yes
28531
0.05

yes
no
28531
0.04

no
no
28531
0.03

yes
yes
28531
0.03

yes
no
28531
0.02

no
no
28531
0.01

Region dummy
Industry dummy
Observations
R-squared
Note: +p<0.10; *p<0.05; **p<0.01
Cluster robust standard error in parentheses.

24

Table 5 The determinants of wage rise

Union dummy
Regular employees Male
Regular employees Female

Regular employee ration
State of management
Plans to extend on business
Problems scant of labor quantities
Problems scant of labor qualities
Problems excess of labor quantities
Problems harsh competition
Normal working hours
Plans to hire new employee
Region dummy
Industry dummy
Observations
Log likelihood

[1]
wage

[2]
wage

[3]
wage

0.147
[0.019]**0.002[0.000]**0

0.131[0.018]**0.002[0.001]**
0.001

0.134
[0.016]**0.002[0.001]**0.001[0.000]+[0.001][0.001]

0.119[0.025]**-0.076[0.006]**0.066[0.009]**0.013[0.012]0.053[0.008]**0.043[0.010]**0.023[0.008]**-0.005[0.004]0.151[0.013]**0.114[0.028]**-0.073[0.006]**0.078[0.009]**-0.017[0.021]0.05[0.010]**0.028[0.011]*0.008[0.011]-0.009[0.004]*0.164[0.024]**0.115[0.027]**-0.071[0.006]**0.079[0.009]**-0.02[0.021]0.049[0.010]**0.026[0.012]*0.006[0.012]-0.01[0.004]*0.166[0.023]**

yes
yes
28531
-17906.45

yes
no
28531
-18168.88

no
no
28531
-18249.73

Note: +p<0.10; *p<0.05; **p<0.01
Cluster robust standard error in parentheses.

25

Table 6 The determinants of overtime working hours

Union dummy
Regular employees Male
Regular employees Female
Regular employee ration
State of management
Plans to extend on business
Problems scant of labor quantities
Problems scant of labor qualities
Problems excess of labor quantities
Problems harsh competition
Plans to hire new employee
Normal working hours
Region dummy
Industry dummyσ
WaldHansen J test
Observations

[1]
Tobit

[2]
Tobit

[3]
IV

[4]
IV

[5]
IV

0.191
[0.538]0.075[0.005]**-0.005[0.017]1.317[1.372]-1.516[0.246]**1.708[0.243]**2.9[0.575]**2.12[0.313]**2.072[0.424]**0.868[0.383]*3.014[0.391]**
0.889[0.162]**0.131[0.548]0.075[0.005]**-0.006[0.017]1.158[1.352]-1.508[0.250]**1.721[0.242]**2.88[0.565]**2.118[0.314]**2.09[0.430]**0.873[0.377]*2.999[0.380]**0.894[0.161]**-14.199[6.312]*0.103[0.017]**-0.045[0.009]**-1.027[0.565]+-0.839[0.173]**1.011[0.252]**1.912[0.413]**1.413[0.254]**1.956[0.351]**
0.352[0.233]2.074[0.310]**0.417[0.115]**-12.286[6.672]+0.098[0.018]**-0.043[0.009]**-0.967[0.564]+-0.845[0.171]**1.009[0.249]**1.943[0.413]**1.435[0.252]**1.961[0.348]**0.357[0.231]
2.082[0.306]**0.443[0.119]**-9.382[7.368]0.09[0.019]**-0.041[0.009]**-0.877[0.569]-0.855[0.169]**1.005[0.245]**1.988[0.411]**1.47[0.251]**1.968[0.343]**0.365[0.227]2.095[0.302]**
0.482[0.128]**yes
yes
14.742
0.737
‐
‐
28531

no
yes
14.749
0.737
‐
‐
28531

no
yes
‐
‐
6.513
9.903
13826

no
yes
‐
‐
8.309
5.12
13826

no
yes
‐
‐
9.673
3.418
13826

Note: +p<0.10; *p<0.05; **p<0.01
Cluster robust standard error in parentheses.

26

Table 7 The determinants of rate of overtime workers and improvement thereof

Union dummy

Regular employees Male

Regular employees Female

Regular employee ration

State of management

Plans to extend on business

Problems scant of labor quantities

Problems scant of labor qualities

Problems excess of labor quantities

Problems harsh competition

Plans to hire new employee

Normal working hours

[1]

[2]

[3]

[4]

[5]

[6]

[7]

45hours

60hours

45dummy60dummyimprove

improve

improve-0.093[0.060]-0.01[0.001]**-0.002[0.001]+
0.067[0.077]0.073[0.021]**-0.086[0.030]**-0.061[0.029]*-0.203[0.024]**-0.164[0.034]**-0.021[0.027]-0.213[0.033]**-0.084[0.011]**-0.096[0.061]-0.01[0.001]**-0.001[0.001]-0.022[0.095]0.09[0.015]**-0.089[0.031]**-0.074[0.040]+-0.202[0.027]**-0.174[0.036]**-0.032[0.026]-0.195[0.038]**-0.055[0.011]**

0.022[0.015]0.001[0.000]**0.000[0.000]-0.011[0.013]-0.007[0.003]*0.001[0.005]0.002[0.006]0.036[0.006]**0.014[0.008]+-0.004[0.007]0.036[0.008]**0.013[0.003]**0.017[0.007]*0.000[0.000]**0.000[0.000]0.008[0.007]-0.002[0.002]0.005[0.002]*0.004[0.004]0.011[0.002]**0.017[0.004]**-0.004[0.003]0.013[0.004]**0.004[0.002]*-0.02[0.034]-0.003[0.000]**-0.003[0.001]**0.084[0.070]0.031[0.020]-0.2[0.023]**0.039[0.040]-0.034[0.022]-0.135[0.031]**-0.072[0.026]**-0.166[0.026]**0.027[0.009]**

yes
yes
13826

yes
yes
13826

yes
yes
13826

yes
yes
13826

yes
yes
12146

Region dummy
Industry dummy
Observations
Note: +p<0.10; *p<0.05; **p<0.01

Cluster robust standard error in parentheses.

27-0.032-0.033[0.039][0.043]-0.003-0.003[0.000]** [0.000]**-0.004-0.006[0.001]** [0.001]**
0.145[0.080]+0.016[0.021]-0.236[0.023]**0.075[0.039]+-0.027[0.023]-0.138[0.033]**-0.053[0.026]*-0.15[0.027]**0.029[0.007]**
no
no
12146

no
no
12146

Notes1

Employment relation is defined as a comprehensive concept covering the relationshipbetween managers and employees. It includes the collective industrial relations and informal
human resource management.
2

Moule (1998) insisted that informal communication is common in SMEs.

3

Bouquin et al. (2007) analyzed employee representation of SMEs in European countries andargued that although the difference in unionization rate by firm size is small in Sweden, unions
are less formed in SMEs in most of European countries.
4

Kirton and Read (2007) insisted that the preference of managers for flexibilities over formal

policy militates against equality policies for females and minorities.
5

Based on the “Economic Census” in 2013, samples were allocated for each prefecture

according to the number of private business establishments with less than 300 employees(excluding agriculture, forestry, and fishery). The extraction is performed using different
extraction ratios by different employee size. The survey is conducted in all prefectures in Japan,
except Fukushima, Tochigi, Shizuoka, Fukui, and Oita.
6

However, the survey on the rate of employees who work overtime for more than 45 or 60

hours was conducted only in 2013.
7

The base for dummy variables are “continuing to hire the incumbent elderly employees,

others, and the elderly not hired.”28