This spring, Suguru Takamatsu, one of 814 new employees of Matsushita Electric Industrial Co., took his destiny into his own hands.
Takamatsu, 25, declined to join the ranks of the Japanese salary men who rarely think about the financial aspects of retirement, expecting their employer to hand them a fat check at the age of 60. Instead, he elected to have his retirement benefits, along with other perks the company would normally provide over the course of his career, paid to him directly as he advances at Matsushita.
The budding engineer plans to invest them on his own, taking advantage of the new opportunities promised by financial deregulation. “There is no guarantee that I’ll keep my job at Matsushita until I retire,” Takamatsu said. “There might be layoffs, or I might change my mind, find a better job or better conditions.”
Takamatsu’s choice–and Matsushita’s decision to let him make it–may seem like a tiny thing, but in it you can hear the cracking of the chains that have traditionally linked Japanese employee to employer for life.
“We want to give more opportunities to our employees to select their course,” said Atsushi Murayama, managing director of personnel and general affairs at Matsushita, the electronics titan that markets products under the Panasonic and National names. “We accept that some will seek work later outside the company, but that’s the reality of the changes in Japanese business and in Japanese society.”
For the first time, Matsushita–long considered one of the most conventional big businesses in Japan–gave new recruits a choice of three retirement plans, knowing full well that it was striking a blow against an employment system that has been the backbone of the industrial complex that made Japan a global economic power.
But the growth of the Japanese economy has ground to a halt, and some business executives think the employment system has a lot to do with the stagnation.
“The Japanese-type management system, such as the seniority system or lifetime employment, cannot be continued,” said Isao Nakauchi, chairman, president and chief executive of Japan’s largest retailer, Daiei Inc., which is grappling with a huge debt burden and a slowdown in consumption.
It’s not that Nakauchi thinks lifetime employment doesn’t have its place in Japanese industry. Everyone is well aware of the benefits of having a core group of committed employees. “Employment stability is still the biggest obligation an employer has,” said Hiroyuki Matsui, a manager at the Nikkeiren, the Japan Federation of Employers’ Associations.
Murayama of Matsushita agrees–to a point. “If we lose that totally, we won’t have success competing with America,” he said. “But those types of people who elect big businesses like Matsushita because they’re looking for a stable, steady, comfortable environment, they make me a little uneasy.”
Matsushita’s new retirement options have caused quite a stir in Japan.
“I was astonished, not just surprised,” said Matsui. “The management style of Matsushita is very, very traditional, with more or less a family-style relationship to employees, so it’s difficult to understand why they have introduced this kind of thing.”
With a note of disapproval, he suggested that newly minted college graduates lack the preparation to make the choices Matsushita is giving them. “It is impossible to judge the success of this program for 20 to 30 years,” he said.
But Matsushita is not alone. Ever so gently, corporate Japan is trying to reduce its reliance on lifetime employment by tinkering with the rigid, seniority-based salary system. While this movement has been going on for a while, it is now picking up momentum.
Many companies have introduced merit-based pay systems for management in an effort to reduce the relevance of seniority. Fujitsu has gone the furthest, announcing recently that merit would determine the pay of all its 47,000 employees in Japan.
Some companies are even fiddling with the semiannual “bonus,” a label that implies a link to performance but in Japan refers to a twice-yearly payment negotiated by the unions. Toyota Motor Corp. has started calling the bonuses “lump-sum payments” in hopes that someday it can give real bonuses to employees whose work is exemplary.
Amid today’s hard times and rising unemployment, companies also are brazenly reducing overtime and cutting some benefits.
Matsushita, a pillar of Japan Inc., has been cautiously chipping away at the traditional mold. The salaries of its 11,000 managers are determined by merit, not seniority, and it is negotiating with its union over a similar plan for the rest of its 83,000 employees in Japan.
“We need team spirit, yes, but at the same time we need creative, independent thinkers who want to work outside the team,” Murayama said. “To those people, the uniform pay system is something frustrating, something that gets in the way of human development.”
This year, it introduced a performance-based stock option plan for management, and it is seeking a cost-effective way to push the mandatory retirement age to 65 from 60. With its low birth rate, Japan will eventually face a labor shortage that could be partly addressed by reversing the trend toward early retirement and extending working life–though seniority-based pay makes older employees expensive. If birth rates do not increase, the population will plummet from 125 million today to a stunning 55 million by the year 2100, according to government forecasts.
Matsushita’s retirement plan, however, seems to be somewhat of a novelty in Japan. Japan has nothing like a 401(k) program, and the notion of self-directed investment for retirement–an idea that has taken hold in the United States–is as alien as the thought of wearing shoes in the house.
Nonetheless, most Japanese are well aware that they will probably have to pay for a good portion of their retirement themselves because, all things remaining the same, the government pension fund, much like the U.S. Social Security System, is facing a financial crisis early in the next century.
As for Matsushita, it is hoping the new program will attract a higher caliber of job applicant. “One of our frustrations has been that we can’t recruit above-average students so easily,” Murayama said. “The traditional pay system is regarded as limiting to creativity, so those creative people we want to attract look elsewhere for a job.”
The new retirement program gives recruits a choice of three plans. They can, as Takamatsu did, opt to have pension benefits paid out to them as they go; they can have a portion paid out and leave a portion under the company’s administration, or they can choose the traditional, lump-sum-on-retirement system.
Even in the traditional system, workers normally get a partial payment if they leave a company before retirement, but job switching has been rare and, with lifetime employment the norm, openings scarce. And while Matsushita guarantees a respectable 7.5 percent return on workers’ retirement money, some employees think they can do better.
Tomohiko Hasegawa, who graduated from Meiji University this year with a law degree, chose the conventional system. It’s not that Hasegawa, a 23-year-old lawyer hoping for an international posting with Matsushita in the future, isn’t interested in managing his own money. But he figures he can do that by setting aside a portion of his salary.
“I have no plans to switch jobs, so why shouldn’t I participate in the company plan,” he said. “I’m planning to stay for a long time.” Much to Matsushita’s surprise, however, 39 percent of its new employees opted for the non-traditional plans.
Many of them were women like Yuka Kitadai, 22, who often do not view their careers as lifetime endeavors. Kitadai, who graduated from Keio University, chose the plan that pays her the retirement allowance portion of her total benefits package but allows her to participate in programs for housing loans and other company-sponsored investment options.
“I want to be able to use it now,” she said. “I thought I could invest it myself or use it to travel and learn some other languages on my own.” While she’s aware that as a novice to investing, she may lose the money, Kitadai said she was prepared to take that chance. She does not expect to be laid off, but she wants to be ready just in case.
“One of the reasons I want to start learning another language is because I think I’m going to have to protect myself with my own skills,” Kitadai said. “That way even if I got laid off by Matsushita, I could use my skills to find another job.”
Kitadai was among the 31 percent of new employees who opted for “Plan B,” which pays out retirement allowances along with the semiannual bonus but allows participants to invest in various company savings plans at attractive rates, take part in the company’s stock purchase plan and qualify for special loans for their children’s education and scholarships. Under that plan, a new employee who makes less than $1,478 a month would receive $597 a year in retirement pay.
“Plan A,” the more radical of the company’s three retirement plans, was selected by 8 percent of new employees, who had to have a specialty like law or engineering to qualify; such people would presumably have more job options in the future. They chose to forgo participation in company savings, housing and stock programs in exchange for additional compensation: a new employee earning less than $1,478 a month gets $1,418 a year in advance retirement payments.
Like Kitadai, Shinichi Yamane, a graduate of Ohio State University, opted for Plan B. He liked it because it offered him the chance for some extra cash but also protected a bit of his future by allowing him to participate in various company benefits.
Yamane, a 28-year-old electrical engineer, will join the semiconductor development division when his initial training is finished. He said he planned to use the additional money that will come with his first bonus on a new stereo, clothes, perhaps even a car.
Like Yamane, Takamatsu agreed that his choice, Plan A, raised the stakes for him considerably, but he was sanguine. “There are no guarantees anymore here,” he said. “I have to take responsibility for my own future.”
