Lifetime Employment Continues to Give Way to the Gig Economy in Japan
Both the reliance on part-time and temporary employees and the total number of such workers are increasing.
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What’s new: The annual ranking for 2023 of the percentage of non-permanent employees, such as part-time workers, temporary workers, and gig workers, at Japan's 500 largest public companies has just been released. The results show that both the reliance on non-permanent employees and the total number of such workers are increasing.
Context: For a country that has traditionally been known as the land of companies that offer lifetime employment to their employees, it may seem somewhat ironic that some of Japan's most respected public companies rely so heavily on non-permanent employees. While some of these companies continue to provide what is essentially a job for life to some of their employees, it has been common practice for many decades to hire large numbers of part-time workers in order to save costs. In addition, non-permanent employees allow companies to quickly scale up or down their workforce as needed. This is ideal for handling short-term projects, seasonal demands, or covering employee absences.
While they may give up having a workforce that has the same level of understanding of the company's culture, processes, or products as permanent employees, the cost-effectiveness and flexibility of managing a part-time workforce is often considered essential to maintaining global competitiveness.
Why it matters: The so-called "hollowing out" of Japan's industrial base, particularly the decline of middle-class manufacturing jobs, may ultimately affect the ability of Japan, Inc. to maintain and expand its manufacturing prowess in the face of demographic decline.
What's happening: The long-term trend of increased reliance on non-permanent employees shows no signs of abating in Japan.
Compared to survey results from previous years, more companies in 2023 have increased their reliance on part-time employees, temporary positions, and gig workers. The country's post-Covid labor shortage is driving a surge in demand for people to do the work once performed by full-time employees.
By the numbers: Annual survey results confirm the trends1.
The number of non-permanent employees working for the top 500 companies is over 4 million in aggregate.
The number of non-permanent employees exceeding 10,000 people per company included 97 firms, a slight increase from 95 companies in the previous survey.
The total number of non-permanent employees at the top 100 companies was more than 2.41 million, an increase of about 20,000 from the previous survey.
While the numbers above are large and significant, the vast majority of Japanese workers are employed by much smaller companies, many of which are not publicly traded. According to the latest government statistics, a total of 62.4 million people were employed in the country as of January 2023. Of these, 26.5 million, or 42.4%, were full-time employees. The vast majority, 36.9 million or 57.5%, were employed on a part-time or temporary basis. The number of full-time employees in Japan peaked in the late 1990s. In 2000, there were more than 28.6 million full-time workers in Japan.
Zoom in: The retail trade sector seems to dominate the ranks of companies with a relatively high percentage of non-permanent employees.
#1 Ranked Seria (セリア): This chain of 100-yen stores (similar to a "dollar store") ranked first by a narrow margin at 95.63%. It is the second largest such chain in the 100-yen store category and is accelerating the opening of new stores from its home base in the Tokai region to the Kanto region and other parts of Japan. The company is also known for its high profit margins due to its effective use of IT to improve efficiency in inventory management and product development. In recruiting part-time employees, the company allows a variety of work styles, such as working only two hours a day or one day a week. Seria has increased the number of non-permanent employees in line with the increase in the number of stores, and while the number of permanent employees remains at around 500, the average number of non-permanent employees, based on an eight-hour day, is 12,045.
#2 Ranked Tokyo Individualized Educational Institute (東京個別指導学院): This company, which relies on a workforce that is 95.61% part-time, is a private tutoring school affiliated with education powerhouse Benesse. They employ more than 10,000 tutors, most of whom are university students who work part-time. The company is popular because it allows for flexible work schedules, pays well, and looks good on a resume.
#3 Ranked Succeed (サクシード): Like the Tokyo Individualized Educational Institute, Succeed is a tutoring school. It ranks third with 93% of its staff being part-time. While tutoring is its core business, Succeed is also involved in placement and dispatch services for educational instructors and childcare workers. The company employs 621 people in its tutoring schools and 307 non-permanent employees in its school placement business. Succeed recruits part-time teachers with flexible work schedules, including as little as 90 minutes one day a week or only for a limited number of subjects in which they have expertise.
#4 Ranked WASH House (WASHハウス): As Japan's largest coin laundry chain with more than 1,400 locations nationwide, WASH House employs 1,034 part-time employees (92.49% of its total workforce) and only 84 full-time employees.
#5 Ranked Takayoshi Holdings (タカヨシホールディングス): This company is essentially a national chain of farmers markets. They have only 80 full-time employees, but employ 861 part-time workers (91.5%). According to the company's website, their "'Wakuwaku Hiroba' aims to be a 'second sales channel' for local producers to sell their prized products, and a 'local food select store' for local consumers to select delicious local products.”
Go deeper: Looking at publicly traded Japanese companies ranked by the sheer number of non-permanent employees, there are some familiar names.
#1 Ranked Aeon (イオン): By far the largest employer was Aeon with 265,017 non-permanent employees, accounting for 62.3% of the company's 425,421 jobs. Aeon's overseas sales ratio is only about 8%, and the company generates more than 90% of its sales domestically. Thus, the company plays a major role in employment in Japan. Looking at the number of non-permanent employees by segment, 103,151 are employed in its network of general merchandise stores, and 83,243 are employed in food supermarkets such as My Basket and Inageya.
#2 Ranked Japan Post (日本郵便): The post office, which was fully privatized in 2017, maintained its second-place ranking by continuing to employ 142,436 non-permanent workers, or 38.5% of its total workforce of 369,805. One would expect Japan Post to employ more part-time workers in the labor-intensive business of delivering mail and parcels across the country, especially given how difficult it is for the post office to turn a profit. With such a large number of full-time employees, it is difficult for the company to cover expenses. As a result, postage costs are likely to continue to rise. See "You've Got Mail, but It's Going to Cost You!”
#3 Ranked Toyota Motor Corporation (トヨタ自動車): 20.5%, or one in five, of the world's largest automaker's workforce were non-permanent employees in 2023. At Toyota, non-permanent employees include both temporary workers and part-time temporary associates. The average number of non-permanent employees is reported as the number of non-permanent employees during the fiscal year. Thus, 83,565 were employed in the automotive business as of March 31, 2023, an increase of over 6,000 from 77,020. This reflects the fact that the company is expanding domestic production to meet growing demand.
#4 Ranked Seven & i Holdings (セブン&アイ・ホールディングス): Japan's largest convenience store operator, 7-11, relies heavily on part-time employees, as might be expected. With a total of 83,094 employees, part-timers make up about half (49.7%) of the company's overall workforce of 167,248. It is somewhat surprising that the percentage of non-permanent employees is not higher.
#5 Ranked Zensho Holdings (ゼンショーホールディングス): The parent company of Japanese fast-food chains such as Sukiya, Nakau, Coco's, Big Boy, Hama-sushi, and Lotteria (among others) moved up to fifth place in 2023, following a broad recovery in the low-cost dine-out category post-Covid. With 56,313 employees, this group accounts for about 3/4 (76.5%) of the company's total workforce of 73,637 employees.
Commentary: While the need to hire, train, and retain reliable full-time employees can be a significant burden for any company, it can be argued that this facet of managing any business is essential and should not be viewed as a hardship, but rather as a necessary challenge. So by relying so heavily on part-time and temporary workers, my gut feeling is that Japan is mortgaging its future to some extent.
Another big wild card - especially as it relates to Japan - is the rate of full-time employment among women. More women in full-time jobs could help address labor shortages, especially in sectors where part-time or temporary workers are common. Encouraging women's full-time employment would tap into a larger talent pool with potentially valuable skills and experience. More childcare facilities, flexible working arrangements, and parental leave policies would be crucial to support women in full-time roles. In addition, changes in societal attitudes towards working women and women's career progression would be necessary for a long-term impact.
What's next? Non-permanent work arrangements are becoming increasingly common in many OECD countries, and Japan is no exception.
Considering Japan's rapidly aging population and the continuing decline in its overall population, it is highly likely that a shortage of younger workers willing to commit to traditional long-term employment will force Japanese companies to fill these gaps with part-time or temporary workers.
Given Japan's tight labor market, it is highly likely that younger generations of Japanese workers will value flexibility and work-life balance more, making non-permanent work arrangements more attractive.
As part of the central government's long-term plans to improve working conditions, more protections for non-permanent employees will be codified. Such measures include the realization of equal pay for equal work, which is referred to as doitsu rodo doitsu chingin (同一労働同一賃金), conversion to permanent employment contracts, the improvement of support for job changes, enhanced benefits for non-permanent workers, etc. The goal is to make part-time and temporary workers feel more comfortable about their future prospects. We will see what happens.
Links to Japanese Sources: https://toyokeizai.net/articles/-/750877, https://toyokeizai.net/articles/-/750875, and https://www.mhlw.go.jp/index.html.
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The data is based on the number of temporary employees, which is required to be disclosed in annual securities filings if it accounts for more than 10% of total employees; the data was compiled based on disclosures for the period from January 2023 to December 2023.
As always, very interesting, Mark. Thank you. As you say, I can understand why juggling one or more gigs could allow giggers to manage their work-life balance better than full-time slaves; but do you think the size of the gig economy is driven by the employers or the giggers - or both? Are there tax advantages (eg, income tax, insurance, pension funds?) for giggers who structure themselves as some sort of sole-trader business and sell their labor to one or more employers? Or is it something Japan, Inc. does not want to encourage with fiscal incentives?