Labour Flexibility and Productivity in Japan

For a long time the Japanese economy has been a source of wonder and puzzlement. Its performance has been remarkable while at the same time its practices and institutions seem to differ markedly from those existing in other developed economies. These feelings have certainly something to do with the fascination that the Japanese culture and society generally inspire. Perhaps in no other area of economic activity are these societal and cultural aspects as important as in the working of labour markets and in the makeup of labour practices at the firm level. Observers of the Japanese labour markets have been in particular impressed by its low rate of unemployment which, in spite of a prolonged economic crisis, has remained consistently below the 3 per cent mark. In addition, labour relations seem to be, at least when measured by the number of days lost as a result of strikes, much more harmonious than in other advanced countries. A third feature that impresses outside observers is the level of cooperation that seems to exist at the level of the firm and that finds its expression in sophisticated practices such as the quality control circles (QCCs). Some of these practices have been applied, with relative success, to other countries, both developed and developing.