Competition and Cooperation: Wage Profiles, Job Retention, and Dualism

Abstract

Building upon the two-track contracting of the prewar period, the institutional framework for a decidedly more egalitarian contract was established in large firms through the protracted negotiations between unions, management and government in the wake of Japan’s defeat in the Second World War. Guarantees of employment stability, extensive training and the potential for rising into the ranks of management were extended down to the shop floor. As a result, internal dissension stemming from blue-collar resentment over being excluded from the ranks of ‘company membership’ was mitigated. This increased the viability of the large-firm contract from the viewpoint of internal firm morale and training. But were the resulting labour contracts viable in terms of the performance of the aggregate economy? The combination of high rates of economic growth and a youthful age structure ensured that viability over the period 1952–70. Facing an active supply pool teeming with young fresh graduates and family firm workers looking for more attractive employment opportunities, and enjoying rapid output and hence employment growth, most large firms during the high-speed-growth era had, year after year, labour forces heavily weighted towards entrants. As a result, promotion rates were high.