Korea and Japan: differences, similarities and the Asian Economic Crisis

For my blog post this week, I am going to focus on employment relations in Japan and Korea, specifically their similarities and differences, and also the effect that the Asian Economic Crisis in the 1990s had on Japan, in particular. Japan and Korea are said to have some key similarities and differences in their approaches to employment relations (ER). As outlined by EeHwan Jung (2010) in the article, 'Employment relations in Japan and Korea', similarities include enterprise unionism, paternalistic management, seniority wages, merit-based pay, internal labour markets and the segmentation of labour markets into core and periphery. 

However, there are some key differences, such as that Japan is typically cooperative in nature as outlined by Jung (2010), compared with Korea, which due to the ‘them versus us’ mentality between management and unions. This confrontational attitude is highlighted in the number of working days which are lost due to strike action with Korea counting 114 per 1000 employees in 2000 compared to Japan with 0.7 lost workdays. Unlike Japan, Korea does not follow the practice of lifetime employment, and Korean employers are more authoritarian and market-driven. Thus, Jung puts forth the conclusion that Korea is not a variant of the Japanese ER model, but a mixture between the US model and the Japanese model.

With reference to the impact that the Asian Economic Crisis has had on the two economies, I have found an interesting article by Stanley Fischer (1998), which described the impact on Korea and Japan. Korea was influenced by deep currency depreciation, loss of market confidence and weak financial systems as a result of the crisis, whilst Japan also suffered as a result of its weak financial system and the resultant high unemployment rates and Fischer proposed the need for substantial fiscal expansion for the Japanese economy.

As discussed by Bamber, Lansbury and Wailes (2011) in their article ‘International and comparative employment relations: globalization and change’, in recent years there has been a growth in atypical employment such as part-time, fixed-term and temporary workers, which raises issues such as job security and the leap from atypical to regular employment. There has also been issues arising due to Japan’s aging population and the diminishing of employment opportunities, which is contrasted with the overworking of younger employees due to cuts to recruitment.

It is clear the Asian Economic Crisis has had an influence on employment relations in Japan. However, although some aspects of the traditional model have changed slightly in terms of atypical employment, it has not deviated away completely from the traditional model.

To read more of Stanley Fischer’s article, see here: https://www.imf.org/external/np/speeches/1998/040898.htm

Globalisation and the German Auto Industry

When I looked through the case study for this week, ‘Employment relations in the banking and automotive industries in Germany’ by Haipeter, Jürgens and Wagner (2012), I was particularly interested in staffing reductions and job security due to globalization in Germany’s automotive industry. Based on some of the articles that have been released on the subject of globalisation and its impact on Germany, it was clear there is much debate over whether Germany will benefit as a whole, or if it just meant workers are going to be worse off. Words like ‘aftermath’ and ‘catastrophic’ were used… it was intense. So, I thought I would focus my post on the benefits to Germany’s automotive industry, the consequences for the employees, and what this means for Germany's employment relations.

Germany’s traditional employment relations system shifted away from high job security and high pay, due to the effects of globalisation. Offshoring and the increase in the use of agency work in the auto industry has led to staff reductions, and many believe that this poses a serious threat to the future of the German labour market. However, union activity has been strong and served to fight against decreased job security. Unions have been able to hold some control over bargaining strategies on workers’ behalf, and have needed to be forward-thinking and flexible in their approach. The union activity is promising, and as discussed in the case, Germany’s employment relations are still seen as being generally coordinated as a result.

I found an interesting article by Eric Heymann (2012) that highlighted the benefits that globalisation has had for Germany. In his opinion, the benefits of the globalised auto market have given the industry the shot it needed to grow and expand successfully. Heymann states the industry growth of 25% in 2010 has put Germany on the front foot, and the gains in market share have been advantageous for Germany’s economy. A definite struggle exists between organisations who need the market share and profitability to survive, and their employees who are a factor in the cost of production. I’m sure management would have like to keep their production solely in Germany. However, given the opportunities for low cost labour overseas and the success it has generated, I do not see how this can be a viable option for them. 

I’m interested to see what the future holds in terms of the effects of globalization, and whether there will be a definite shift toward the decentralization of Germany’s employment relations.

For more information on Heymann’s article, please follow the link below:

http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000269743/Germany%E2%80%99s+auto+industry%3A+Driver+and+beneficiary+of+globalisation.PDF