The deepening divide In Japanese employment: The increasing marginalization of contract workers as explained by path dependence, vested interests, and social psychology

In Japan, contract workers have never been on par with regular workers in terms of pay or benefits for similar work. However, the disparity between contract workers and regular workers has seen a sudden and dramatic turn for the worse since 2018 when the unintended consequences of the 2012 amendments to the 2007 Labor Contracts Act took effect. Although employment numbers may appear consistent over time, in actuality, as of 2018, nearly all contract workers are being replaced every three to five years. This is because employers are choosing contract lengths that prevent contract employees from qualifying under the 2012 amendments for ongoing, long-term employment. Accordingly, being forced to change jobs every three to five years in Japan’s seniority-based employment system is causing contract workers to fall further and further behind their regular worker peers in terms of wages, as well as job security, even as they are performing the same work. This is striking because the purpose of the 2012 amendments to the Labor Contracts Act was to bolster employment security and provide more equality between regular and contract workers. Instead, as more and more employees lose regular employment and fall into contingent and contract work due to corporate downsizing, the marginalization of contract workers in Japan increases, and their numbers expand. This paper proposes an interdisciplinary explanation of the evolution of contract work in Japan since 2000, drawing on: 1) a case study, and 2) labor market data.