The Role of Labour in Japanese Economic Miracle

By JAMES D. HODGSON

Summary

This Forum of Free Enterprise pamphlet (June 1978) reproduces the text of a lecture by James D. Hodgson — U.S. Ambassador to Japan from 1974 to 1977, U.S. Secretary of Labour from 1970 to 1973, and adjunct scholar at the American Enterprise Institute — delivered in November 1977 before the Industrial Research Council at the Wharton School. The FFE Introduction frames it against the contemporary Indian debate over the Bhootalingam Committee Report and the role of labour in the Indian economy, while cautioning that institutions and values cannot simply be transferred from one country to another. Hodgson recounts how Japan unsettled his American assumptions about work: a nation where ‘equal pay for equal work’ is neither practised nor sought as a goal, where 2 percent unemployment is considered unacceptably high, where young workers enjoy below-average unemployment, where workers vote against a shorter work week, where pay is almost wholly unrelated to individual productivity, where promotion follows length of service rather than demonstrated competence, and where workers nonetheless appear pleased with this state of affairs.

Hodgson examines the Japanese ‘enterprise’ union — a union limited to a single employer that Americans would dismiss as a company union, yet which he watched extract large wage gains over three successive years far exceeding those of their American counterparts. He observes that Japanese workers rarely strike, that very few man-days are lost to strikes, and that a ‘long’ strike in Japan lasts only about ten days, with militant unionists preferring tactical gestures such as wearing a red arm band to cause management loss of face rather than prolonged stoppages. The address builds a portrait of an industrial culture organised around loyalty, harmony and lifetime commitment rather than confrontation and individual bargaining.

In the concluding section Hodgson distils the Japanese ‘economic miracle’ to two fundamental thrusts: a concerted national commitment behind a strong and sustained economic effort, with every segment of society playing a supportive role; and concentrated national attention on creating a highly motivated, talented, rewarded and employed workforce. Japan, he argues, bet that focusing on these strengths would minimise the need for expensive government employment programmes and remedial manpower measures — and won its bet, producing satisfying jobs and a superior workforce. The lesson he draws for the United States is to consider reversing its practice of cushioning weaknesses and instead adopt the Japanese approach of capitalizing on strengths.

Key points

• The work reproduces a November 1977 Wharton School lecture by James D. Hodgson, reprinted by FFE in June 1978.

• Hodgson was U.S. Ambassador to Japan (1974-77) and U.S. Secretary of Labour (1970-73).

• The FFE Introduction ties it to the Indian debate over the Bhootalingam Committee Report and the role of labour.

• Japanese labour defies American norms: no ‘equal pay for equal work’, 2% unemployment deemed high, pay unrelated to individual productivity, promotion by seniority.

• Japan’s ‘enterprise’ unions, limited to a single employer, nonetheless win large wage gains while rarely striking.

• Strikes are short (about ten days is ‘long’) and militancy is expressed symbolically, e.g., wearing a red arm band to cause management loss of face.

• Japan’s success rests on two thrusts: a concerted national economic commitment and the creation of a motivated, rewarded workforce.

• Hodgson’s lesson for America: capitalize on strengths rather than cushion weaknesses with costly government programmes.

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