Comparison of the British and Japanese Industrial Relations System - Essay Example

A comparative study of employment system. Industrial relations in UK and Japan: past, present and future. The modern Industrial Relations have gonethrough many changes. These changes are very much visible when we compare British and Japanese Industrial Relations system. Both of these nations are strong economical powers. They practice their own brand of Industrial Relations. Many of these practices are similar but many are unique to the country. UK and Japan did not come up with their IR system over night. They are the result of many year of trial and error. Especially the last two decades had great influences over the IR system of these two nations The term ‘industrial relations’ came into common use in Britain and North America during the 1920s. It has been joined by personnel management and, since the 1980s, human resource management (HRM). All there denote a particular activity (the management of people) and the area of academic enquiry. It covers relationship between manger and worker in all spheres of economic activity. The focus is employment: all forms of economic activity in which an employee works under the authority of an employer and receives a wage in return for his or her labour. Industrial relations thus excludes domestic labour and also self-employed and professionals who work under own account. Most studies of industrial relations have focused on the intuitions involved with the collective bargaining, arbitration and other forms of job regulation. However, we see industrial relations as dealing with all aspects of employee relationship including human resource management. Although the study of employment relations focuses on the regulation of work, it must take into account of the wider economic and social influences on the relative power of capital and labour and the interaction of the employers, workers, their collective organizations and the state. Adam (1988) sees industrial relations as having a dual character: it is both an interdisciplinary and a separate discipline in its own right’. Adopting an internationally comparative approach to employment relations not only insight from several disciplines but also knowledge of different national context. In this paper I will try to examine the ways in which comparative analysis can contribute to an understanding of the factors that shape national patterns of employment relations and identify the main features of two different countries. Industrial relations system Perhaps the most famous conceptual framework is Dunlop’s (1958) notion of an ‘industrial relations system’. Dunlop argues that the industrial relations system includes three sets of ‘actors’ and their representative organizations (the three parties): employers, workers and the state. These parties’ relations are determined by three environmental context: the technology; market forces; and the relative power and status of the parties. Employment relations UK The United Kingdom has a total population of 60 million people and a labour force participation rate of 75 percent. The UK has fewer people employed in agriculture than any other Organization for Economic Cooperation and Development (OECD) country. About 27 percent of its other civilian population employees work in the industry. The remaining 70 percent work in service. There has been a greater decline in its ‘industry’ category since 1970 than any other OECD country. In spite the relative growth of services, there was steep rise in unemployment. 12 percent in the year 1986 before subsequently falling to 7 percent in the late 1990s. British politics has been dominated by two parties since 1945. The Conservative Party’s support is strongest among the business and rural communities. By contrast, the Labour Party’s support is traditionally strongest in the urban working class communities, through this has broadened. A significant but reducing proportion of its fund still comes from affiliated trade unions. There are several other political parties, including Liberal Democrats and nationalist parties in Scotland and Wales, all of which increased their representation in recent years. Increased devolution of powers to Scotland, Wales and Northern Ireland modified certain provisions in these countries. There has been much change in the employment and industrial relations in Britain over the past two decades. Successive conservative government over the period 1979-97 set the tone, with the radical step by step reform of the industrial law, labour market deregulation and attempt to foster a competitive ‘enterprise culture’. Labour governments since 1997 continued to promote increased privet-sector involvement in the public sector through a variety of initiatives, with potentially significant implications for employment relations. After the post-war period of general labour scarcity, employers cut workforces, often substantially, and union membership has fallen by about 40 percent since 1979. If there has been single dominant thrust in employer strategies and polices in what is diverse picture, it might be summarised as the promotion of the decentralization individualization of employment relationship, aimed at increasing flexibility, but often also bringing perceived job insecurity. There has been growth in temporary part time work, a clearer distinction between the treatment of core and peripheral workers in some organizations, and an increasing incidence of multi organizational arrangement through outsourcing, partnerships, franchises and alliances. There is little doubt that the landscape of British employment relations has changed substantially since 1979. Japan With the population of 127 million people and a GDP of $4765 billion, Japan is one of the largest economies in the world. Since the early 1990s, the Japanese economy has endured a period of economic downturn and low economic growth. in 1998 financial collapse and other adverse factors caused economic growth to fall to minus 0.7 percent over the previous year. this was the second time that the Japanese economy had a negative growth over the pervious year in the post year period. Japan faces a difficult task to improve its economy in the face of increasing global competition. The post 1945 period has seen Japanese politics dominated by the conservative Liberal Democratic Party (LDP) and Japanese Socialist Party (JSP) after 1996 they changed their name to Social Democratic Party of Japan (SDP). Depending on there dominant ideology, unions are associated with various parties, including SDP, The democratic Socialist Party (DSP) and Japan Communist Party (JCP). successful candidates from these parties may be recommended or supported by a union, or may have been associated with the union in the past Japan has a labour force of 68 million. The labour force participation was 73 percent in the year 2000. Some 83 percent of the labour force is employees. japans’ labour force grew by 1 million over 1995, with the number of job holder dropping. in 2000 about 7 percent of the labour force worked in primary industry, including agriculture and fisheries. Manufacturing, mining and construction industries employed 33 percent, while 60 percent worked in the tertiary industries, including services, wholesale and retail, finance, utilities and government. The ‘Japanese’ model Lifetime Employment: large-sized companies recruited employees directly from schools and colleges and trained them inside the company as a way to attain long-term sustained services. Currently, they are recruiting mid-career and non-regular workers. To counter challenges brought on by frequently changing technology and to minimize long-term training costs, employers are seeking mid-career workers whose readymade skills and abilities can immediately be put to use. Employment practices in Japan are becoming more strategic, specifically focusing on cost-cutting measures. Debates on reform of the lifetime employment system have appeared as pressures from the 15-year recession continue, labour costs increase as employees age, and with the growing number of employees who cannot adjust to rapidly developing new technology, typified by information technology. Employers are limiting the number of people they employ with a lifetime contract and are increasingly interested in adopting the so-called “employment portfolio approach,” which offers the most appropriate combination of employment types Seniority-based Promotion and Reward Practices: Seniority-based pay means that a worker’s wages increase according to his / her age and/or length of service. Without a doubt, seniority has been a major factor in determining wages in Japan. Seniority-based promotion and reward practices in Japanese companies are closely tied to the lifetime employment system. Due to increasing competition in the domestic and global markets, large-sized companies are engaged in cost cutting measures. Instead of giving lifetime contracts, they are now showing interest in appointing no regular workers. At the same time, employers are also realizing that the seniority-based wage system is Unsustainable, and are considering revaluating Japanese-style management and employment practices. Employers argue that against the background of intensified competition in the domestic and global markets, it is difficult to increase wages based on a seniority system Enterprise-based Unions: Most unions in Japan are not organized not by occupation or job but by enterprise or establishment. an enterprise union consistent solely of regular employees of a single company, regardless of their occupational status up to lower management levels. Enterprise-based unions remained very internalized in and supportive to Japanese companies. They mostly cover the regular workforce, excluding large sections of the no regular workforce. There has been a remarkable change in the labour market. Unemployment was about 1.1 percent at the end of 1960s. When the economy enjoyed the high growth. Unemployment rate one of the lowest in the world, rose to 3.4 percent in 1997 and 0.5 percent in 2001, and the highest in the post-war Japanese history. Unions UK Britain was the cradle of industrialization. With the ‘industrial revolution’ taking place long before the adult electoral suffrage. Workers were seen as hands as expendable resource for whom the employer had no responsibility beyond the minimum legal obligations of contract (Fox 1985) the law and reality of master and servant was deeply embedded. Many present unions can trace their roots to this mid 19th century or earlier. The earliest unions being formed by skilled craftsmen. Widespread unionization of semiskilled and unskilled manual workers began in the late 19th century, while relatively few white collared workers joined unions until after World War II. British. There were 1384 UK unions recorded in 1920. By 2002 mainly due to mergers there were only 199. Union membership is highly concentred with the 22 unions with over 50000 members accounting for 87 percent of the total membership. Unlike other Western European countries, Britain has only one main confederation- the Trade Union Congress (TUC); established in 1868. In 2000 75 unions representing 85 percent of the British union members were affiliated with the TUC. In contrast with other counterparts in many other countries the TUC has no direct role in collective bargaining. The TUC’s primary role has been to lobby government and in recent decades also the EU. Most British unions have lost their militancy. In both rhetoric and action. And strikes are at record lows. Despite changes in both methods and emphasis most unions are still perceived as being collectively oriented in an age of enhanced individualism, and as associations aiming to protect producers i n the age of consumerism. Although the value of an independent and influential employee voice may be accepted by some employers, in practice unions continue to face difficulties in establishing their cost effectiveness relative to other system of employee representation. Japan Most unions in Japan are not organized not by occupation or job but by enterprise or establishment. An enterprise union consistent solely of regular employees of a single company, regardless of their occupational status up to lower management levels. As enterprise unions usually include blue-collar and white- collar workers as members. There were 63,955 enterprise-based labour unions in Japan. The estimated unionization rate is 19.6 percent, about 10.53 million members out of a total employed workforce of around 53.73 million. However, the unionization rate of non-regular workers is only three percent. At the time when the number of regular workers is declining and the number of non-regular workers is rising, this situation may pose a direct threat to the unionization process. The practice of wage determination in Japan is called the Shunto (the spring wage offensive). During the era of rapid economic growth, the Shunto was popularly seen as effective in substantially raising wages. However, in the last few years the shunto has not been that very successful in achieving sizable wage increases. Since enterprises are forced to increase their work efficiency by cutting costs to compete in the global market, employers are not willing to raise the current level of wages every year as they did in the past. Instead of increasing wages, some have already introduced a performance-based compensation system to cope with the need to cut costs and enhance productivity and performance. The emerging situation has been forcing unions to rethink their future roles. Company-level disputes, which climbed steeply after the oil crises in the 1970s, declined in large companies as labour relations matured and the number of unions declined. Recently available information shows that in companies with 1,000 to 4,999 employees, the dispute rate marked a low of 3.2 percent. As a result, the number of workdays lost due to strikes or other disputes is declining. To increase communications between labour and management, a joint consultation practice has widely been implemented in the recent years. Issues regarding workplace environment, employment personnel administration and wages are discussed through the committee. This practice prevails not only in companies with union representation, but also in non-unionized companies where joint consultation is regarded as a more effective tool to deal with the above issues. Japanese trade union organizations have a three-tier hierarchical structure: enterprise based unions, industrial federations, and the national centre at the top. There is also a wide-ranging network, with local organizations, called “Local RENGOs,” set up in all of Japan’s prefectures. The enterprise-based unions utilize negotiations and labour management consultations in the workplace to improve working conditions, to monitor corporate activities, and to provide services to their members. The industrial federations for their part are composed of enterprise-based unions in the same industry. Their member unions exchange information on common working conditions in the industry, discuss industrial policies and other problems, and strive to rectify these industry-specific problems. The rate of labour union membership, which was 35.4% in 1970, had declined considerably by the end of the 1980s. The continuing long-term reduction in union membership was caused by several factors, including the restructuring of Japanese industry away from heavy industries. Many people entering the work force in the 1980s joined smaller companies in the tertiary sector, where there was a general disinclination toward joining labour organizations. Employers, Organizations and Employment practices UK The Confederation of British Industry (CBI), formed in 1965, the peak employer body in Britain. It is an important lobbyist in relation to British government and EU agencies. But like TUC it does not take part in the collective barraging. The steep rise in the early 1980s, combined with the sharper international competition in product markets and reduction in unionism has greatly enhanced employer power and freedom in action. While employer objective was still in the labour field continue to focus on control, productivity improvement and cost reduction, the mix strategies and balance method is diverse. Many could describe as using opportunistic management style. Mangers sought more flexibility and more employee commitment, with many developing direct employee communication arrangements, teamwork and other techniques associated with Human Resource Management and unilaterally introducing performance related elements into pay, sometimes linked with performance appraisal. Personnel representation on the board has become more extensive in large organizations and especially those that recognize unions. The principal responsibility of specialist mangers remains concerned with issues such as grievance handling, recruitment, selection, equal opportunities and staffing. However it is clear that there has been a growth of a new management practice aimed at employee commitment and high performance. The labour government established the independent Advisory, Conciliation and Arbitration Service (ACAS). ACAS is governed by a tripartite council. Consisting of employer, union nominees and with a balance of independent members. ACAS services are free and includes conciliation in complainants by individuals over alleges breaches of statuary employment rights. As well as in collective disputes. Collective bargaining has a long history in Britain. Developing in several industries in the late19th century. By the early 1920’s multi-employer bargaining for manual workers were well established, and industry level negotiations were encouraged by the government as a way of establishing orderly industrial relations. In 1970 collective bargaining covered almost 70 percent of the workforce. Bu it has since declined to around 40 percent. Very little multi employer negotiation remains in the public sector and it is weakling in the public sector, although it is as twice important as there as single employer bargaining. Bargaining at work place and company level wider since 1980. The move to single unionism and to single table bargaining have accelerated since the 1990s. Japan The structure of enterprise unions usually correspond to the organization of the enterprise and its establishment, department or divisional groupings. Grievances are often settled informally, with formal procedures rarely used. Mangers often attempt to subdue tensions and conflicts and to reinforce a feeling of community. Despite this context there were many large-scale and long disputes in mining and major manufacturing industries in the 1940s and 1950s. Some strikes were led by radical, leftist leaders. Many of these dispute left wounds in employment relationships that were not easily healed Contemporary Japanese employment is relatively stable, and relations between the parties can generally be characterised as cooperative. Some see this as in positive light. Others have a more negative view, arguing that the enterprise opinions are too dependent on employers and, that the relationship is one of collaboration and incorporation. Until the mid-1980s, Japans 74,500 trade unions were represented by four main labour federations: the General Council of Trade Unions of Japan (nihon rōdō kumiai sōhyōgikai, commonly known as Sohyo), with 4.4 million members--a substantial percentage representing public sector employees; the Japan Confederation of Labour (zen nihon rodo sodomei, commonly known as Domei), with 2.2 million members; the Federation of Independent Labour Unions (Churitsu Roren), with 1.6 million members; and the National Federation of Industrial Organizations (Shinsanbetsu), with only 61,000 members. In 1987 Domei and Churitsu Roren were dissolved and amalgamated into the newly established National Federation of Private Sector Unions (RENGO); and in 1990 Sohyo affiliates merged with Rengo. Current and future issues UK The changing pattern of British employment relations reflects some trends that are similar to those found in most DMEs. These include decentralization, increases in the proportion of service and knowledge sector employment and growth of atypical employment. Particular national influences in British context fundamental changes in labour legislation, economic and labour market policy trends, socio demographic and familial changes, and development in managerial and union policies and practices. Employing organizations continue face demands for improved competitiveness and enhanced pressure for quality and value and these have led to substantial changes in employment practices. Employment legislation to curb unions encouraged the growth of individual part-timing, outsourcing, annualized hours contracts. Japan The Japanese economy is facing most difficulty period since the post war era. Except for few exceptional periods, the Japanese economy, having known only steady growth Japanese leaders may understand what need to be done, taking the necessary actions will prove extremely difficult. Japan’s economy is too large to change quickly. Globalization has affected many industries in Japan. This has been particularly apparent in the finance, communication and service sector. the development of information and communication technology is transforming patterns of employment by generating new working styles, such as working at home, during the 1990s, about 2 million jobs were created by it innovation. Many new jobs were created in the service industries, although there was jobs creation in most other industries too. The social and economic environment in Japan is still changing rapidly. There is an aging population. An increasing proportion of highly educated workers, growing participation by women in the labour market, increased immigration of foreign workers, and moves towards an information society, Conclusion: The Eighth World Congress of the International Industrial Relations Associations held at Brussels in 1989 concluded that the emerging socio-economic changes, which are cosmopolitan in their perspective and scope, were increasingly infiltrating the industrialized economies, thereby eventually leading to marked changes in labour relations (Darbishire 1994). In that context, a comparative study of the industrial relations in two major economies like the UK and Japan facilitates a fundamental framework for delineating the altering pressures, changes in industrial frameworks and approaches towards industrial relations, the perspective and aspirations of the new labour force, rising trends towards cohesion and cooperation in the industrial employment, novel employment patterns and shifting labour market dynamics that are to define and shape the industrial relations at a global level (Darbishire 1994). The trade unions in the UK and Japan have today to bear with a marked diversity of pressures, which are leading to changes in the established patterns of union governance and alterations in the roles played by the unions to align and adjust to an emerging and unavoidable, complex scenario (Salamon 2001). With a harmonization in the objectives and goals defining the markets and industries at a global level, the labour relations all around the world are exhibiting an increased predilection for uniformity, rationality, cooperation and flexibility. In that context, the trade unions in both the UK and Japan face similar challenges in the sense that they are being expected to strike a balance between variegated demands made by the workers and a heterogeneous panache on the part of employers in favour of deregulation and flexibility (Lewis & Sargeant 2007). Thus, the primary challenge before the managers and the union leaders in the UK and Japan is to facilitate the need for flexibility with a grass root yearning for equity and security. The Japanese industrial relations system in the last two decades has shown a discernable propensity to stress on the expectations and requirements of the enterprises (Darbishire 1994). Such a scenario calls for enhanced levels of independence, understanding and flexibility on the part of the unions so as to seamlessly allow for the required macro-economic calibrations, the amelioration of the looming trade imbalances, the restraining of an exaggerated stress on exports and the reversion of a trend defined by high nominal incomes with compromised life styles (Darbishire 1994). To furnish a clear grasp over the dynamics of industrial relations in the UK and Japan, it is vital to understand the historical commonality between the production systems in the two economies and to understand why the advantages extended by these systems have diluted over time. The decades following the II World War in both the UK and Japan saw the emergence of mass production economies. The economies in both these nations immensely benefitted from a relatively unhampered supply of raw materials and resources, the organization of labour groups around the doctrines of mass production, and the role played by peripheral institutions and organizations that bolstered this system (Getman 1993). The firms somehow managed to end up with considerable profits by fanning out high fixed costs over extensive production lines. As the production in that era was more or less standardized, this saw the emergences of collective bargaining approaches in the two nations (Gennard & Graham 2005). While the UK adjusted to this model by separating the roles played by labour and management, Japan came out with its own local model of life long employment (John 1996). The collective bargaining model of industrial relations held its relevance from late 40s to early 80s. Such a model encouraged a radical and adversarial approach on the part of the workers, especially more so in the UK (Blyton 2004). The outcome of such a model of conflict resolution more often depended on the ability of the two parties to play upon and withstand economic pressures (Getman 1993). While such a model extended satisfactory wages and fringe benefits to the employees, it allowed the managements to hold on to their prerogative to go for a unilateral decision making while allocating and defining the responsibilities of the workers. The one primary advantage of the traditional production model was that it clearly defined the roles of the employers and the employees in both the countries. However, with the advent of globalization, the markets became more competitive (Bhagwati 2007). Such an enhanced competition did not allow the firms in both the countries to recover the big fixed costs by resorting to price adjustments, which more then often gave way to price volatility. So the British and the Japanese firms started resorting to the most viable option of outsourcing, lay offs and temporary or contractual employment. While the Japanese firms tried to hold on to the old production patterns, the emerging cutthroat competition eventually nudged them in favour of more universal and profitable labour policies. Besides the one major problem with the traditional production model was that it kept the wages of the employees so low that it made it practically impossible for them to purchase the manufactured goods. At present, the traditional production model has been totally done away with the emerging technological competition and enhanced corporate competition, courtesy the globalization (Stiglitz 2003). Technological innovations once again brought the labour to the forefront in the sense that it allowed for utilizing information and ideas in place of physical resources. At the same time, they made the production procedures less labour intensive and more skill oriented. The information technology driven production procedures required a lean approach towards management and an optimal utilization of resources (Bhagwati 2007). The Japanese firms initially grappled with such a situation by resorting to secure wages and employment and competing by cutting costs through the optimal utilization of technology (Shirai 1983). This enabled them to appropriate a major market share in the US in the 60s and the 70s. However, the ongoing economic meltdown, the reverberations of which were audible in the late 90s has brought them at par with other nations. Thus, the current approaches towards industrial relations in both the UK and Japan are a direct outcome of the economic system, which is global and non-Keynesian. The structure of trade unions in both the nations is in a state of flux and much needs to be seen to come out with a concrete and tangible model for industrial relations in both the countries. Words Added: 1027 Works Cited in Conclusion Bhagwati, Jagdish 2007, In Defence of Globalization, Oxford University Press, USA. Blyton, Paul 2004, The Dynamics of Employee Relations, Palgrave Macmillan, London. Darbishire, Owen 1994, Labour Relations in a Changing Environment, 1 April , Industrial and Labour Relations Review, HighBeam Research, viewed 28 July 2009, Gennard John & Graham Judge 2005, Employee Relations, Chartered Institute of Personnel and Development, London. Getman, Julius G 1993, Industrial relations in transition: The paper industry Example, 1 June, The Yale Law Journal, HighBeam Research, viewed 1 June 2009, John, Price 1996, Japan Works, Cornell University Press, New York. Lewis, David & Malcolm, Graham 2007, Essentials of Employment Law, Chartered Institute of Personnel and Development, London. Salamon, Mike 2001, Industrial Relations, Financial Times/Prentice Hall, New York. Shirai, Taishiro 1983, Contemporary Industrial Relations in Japan, University Of Wisconsin Press, Wisconsin. Stiglitz, Joseph E 2003, Globalization and its Discontents, W.W.Norton & Co., New York. Read More