Human Resource ManagementKeiichiro HAMAGUCHI

Chapter 2

Historical Development

Section 2

Seniority System

(1) Labor Market at the Beginning of the 20th Century

• Very flexible labor market with average 100% turnover rate and 12 month length of service

• No systematic apprenticeship

• Wages were determined for individual workers by “boss workers” who were responsible for personnel management within factories.

(2) The Development of In-house Training System

• Workers’ evaluation was based on skills evaluation, not on seniority or age.

• After Russo-Japanese War, employers introduced management paternalism to cope with strikes.

• Employers set up training schools in factories to educate young workers with allowances.

• Trainees were expected to remain for a long time.• Trainees could not move to other factories because of

technological differences.• Trainees were given more favorable conditions and

promising future than newcomers (even to supervisor’s position).

(3) The Emergence of the Seniority System

• Young workers assigned simpler jobs were expected to learn and promoted to more complicated jobs.

• This jobs re-designing met no resistance from skilled workers.

• Workers were paid skill-based wages in this jobs ladder.

• Workers were dissatisfied with arbitrariness of wage determination, causing labor turnover.

• After WWI, regular wage increase system gained popularity.

• Employers made a revaluation of skills and performance of workers once or twice a year.

• Wage levels of “reared-from-juvenile” workers were kept higher than that of newcomers.

• Skill level of jobs, rank order at workplace and wages were related to length of service.

• Seniority system was formed in 1920s.

(4) War-time Wage Regulation and Establishment of Seniority-based Wages

• Military government launched stringent wage regulations.

• 1939 Wage Control Ordinance put a ceiling on starting wages in strategic industries.

• 1940 Revised Wage Control Ordinance established maximum, minimum and average hourly wages in all industries corresponding to age, sex, occupation and region.

• 1942 Essential Establishment Labor Control Ordinance intervened every aspect of HRM (hiring, firing, working conditions wages and benefits etc.).

• Employers must make work rules and wage policies with approval of Ministry.

• “Model wage rules” by Ministry required semiannual wage increase for every worker and set increase rate and range.

• Employers were obliged to adopt seniority-based wage system and centralized personnel management.

• Less restricted fringe benefits prevailed and made up greater part of compensation.

(5) Trade Union’s Achievement in Livelihood Wages and its Reversal

• After the War, labor movement achieved need-based living wage system, called “Densan wage system”.

• Employers called for abolition of livelihood wages and introduction of job-based wages in 1950s.

• Result was basically seniority-based but merit-evaluated wage system.

• Merit means not only performance but also potential ability and, particularly, attitude.