Saturday, June 27, 2009

Firing versus salary cuts

A few weeks ago, there was an event in one of the meeting rooms on the 6th floor of the UDX building. At first, I had no idea that the event was being held until I saw a few people standing outside holding signs advertising it. The signs announced a "Sabra idol goods" show. Not having any idea what this meant, I went up to the 6th floor to check it out. Unfortunately, it was a small room, and a line had formed in the hallway with about 15 guys waiting for someone to leave so they could go in. Turned out that Sabra is a men's magazine like Maxim, and the event was selling t-shirts and photos of some of the latest models. Since I was on my lunch break, I didn't bother trying to wait the 20 minutes to get inside to look around.

But the real point here is the difference between Japanese and western labor practices. In the U.S., there's always a war between labor and management, where the workers want more money and benefits, and management is looking for ways to cut costs. When a crunch comes, one of the first actions taken is to lay off workers, with the tacit knowledge that replacement labor is easy to come by and new hires will generally be cheaper than those being sent out the door.

In contrast, Japanese companies have formed a bond with their employees, and they'll take various steps (like shorter hours, pay cuts and more unpaid overtime) long before they'll contemplate laying anyone off. In part, my opinion is that this occurs because Japan considers the loss of one's job as a form of failure, and failure is a "one strike and you're out" situation. That is, there's little support for helping someone get back into the workforce in another company, and the suicide rate for those laid off is fairly high. Management knows this and wants to avoid contributing to the pressure to walk in front of train, if possible.

The result? In Japan, lots of workers and little to keep them busy during periods of slow sales. Case in point, Sabra had at least ten people at the event whose sole tasks were to wear t-shirts with the name "Sabra" on them, and hold signs advertising the event with arrows pointing the way to the room. 8 hours a day, for 2-3 days in a row, at least 10 people doing nothing but holding a sign (which happens a lot for events held at the UDX). When I asked one of them what the event was, they didn't know and could only keep repeating, "go into the room and find out for yourself" (which I would have done if the time spent standing in line didn't promise to be longer than my lunch break).


Shiroibara said...

My business book has been on human resources and management lately and they mention that American companies are actually looking more at this as well because the cost of recruiting, hiring, training, and so forth is a lot more expensive thatn just keeping people on board. It is interesting to note the differences though. In Japan it's a cultural thing, in America it's an economical thing.

bartman905 said...

You can see this difference by just comparing the current unemployment numbers. The US unemployment rate is near 10% while Japan is still under 5% - a 2x difference!

TSOTE said...

Well, one complication is that U.S. economists view a specific percentage of unemployment as "healthy", so there's always going to be some pressure keep at least above that level. The concept is that there are three kinds of "unemployment" - the people that are unable to work for some reason; people that are between jobs but searching; and those that go back to school for "retraining". It's the "retraining" number that's important, because it means that the workforce is being revitalized be the people stepping out of it, and when they re-enter it, society will be better off. And, hopefully, those "between jobs but searching" will also decide to return to school to improve their chances of finding work. It's the "unemployable ones" that ensure that there will always be some level of unemployment no matter what happens, but you want a percentage above that to keep the workforce "healthy".

This is another reason why you'll find more American companies laying people off right away - the belief is that at least some of them will return to school, rather than just collect unemployment.