Yasuyuki+Nambu

Changing how Japan works
From [|The Economist] print edition Yasuyuki Nambu of Pasona is on a mission to make Japan's labour market more flexible [|Pasona Group]

WHEN Yasuyuki Nambu was an engineering student preparing to graduate from university in 1976, he was struck by the injustices of Japan's workplace. Men were far more likely to be hired than women and were paid much more for the same work. Women who left their jobs to start a family found returning to work almost impossible. Mr Nambu had the idea of creating a non-profit organisation to place women in flexible, part-time jobs. His father suggested turning this job-placement scheme into a commercial venture. The result was Pasona, a firm that now has annual revenues of around $2 billion and which sends around a quarter of a million people off to a job every day. Japan has thousands of temporary-staffing agencies today, but Mr Nambu's was the first, and is still one of the biggest. Mr Nambu has helped to change the way Japan works.

Before Pasona, job placements were handled by a government agency and offered little more than empty, make-work employment. Moreover, part-time and temporary employees were treated as outcasts from Japan's corporate-welfare model, founded on the principles of lifetime employment and seniority-based wages that depend on length of service, not performance. Under this model, privileged “regular” workers enjoyed benefits such as training and the use of company holiday-resorts, and were even reimbursed for the cost of travelling to and from work. In return, they were expected to remain loyal to their employers. All this was denied to “non-regular” or temporary workers, who were also paid much less.

In the 30 years since Mr Nambu set up shop, non-regular employees have gone from the periphery of the Japanese labour force to the mainstream. The trend got a big push during the economic downturn in the 1990s, when big companies retained staff but changed their status to non-regular workers and hired temps whenever openings emerged. And a generational backlash against the stereotypical “salaryman”, or white-collar worker, created a new group of young people, known as “freeters” (a combination of “free” and Arbeiter, the German word for worker), who drifted from job to job. As a result, the number of non-regular workers has increased from around 20% of the labour force in 1990 to one-third of all workers today.

The result is a two-tier labour market, with huge differences in pay and benefits between regular and non-regular workers, even if they are doing the same jobs. But rather than being a manifestation of the problems bedevilling Japan's economy, Mr Nambu believes, freeters are a solution to its ills. They provide flexibility that is beneficial to both employees and employers, he says. As for concerns about growing inequality, the best way to address them is to extend some of the benefits offered to regular workers to freeters, too. Pasona has gone about this in several ways. It has worked to increase the pay of temporary staff, initially by reducing its own margins. It has promoted individual retirement-savings accounts, akin to American 401(k) plans, even before they were enshrined in Japanese law. And it has pushed employers to reimburse non-regular workers' transport costs.

For Mr Nambu, Pasona's mission transcends the workplace. “We want to provide solutions to society's problems,” he explains. He even refers to his top managers as a “shadow cabinet” on the basis they, rather than the government, are in a position to remedy many of Japan's pressing issues—from the declining birth rate to revitalising rural areas—by establishing a more flexible labour market. The private sector, not government, ought to lead this transformation, he says. Such outspokenness has prompted criticism from the establishment. Mr Nambu's flashy ways do not go down well in traditional, buttoned-up Japan. He is as famous for cycling to work in bright red shorts as he is for his forthright views, which he trumpets on his personal website—also unusual in a Japanese boss. Although businesses privately support him, because temporary employees suit their interests, government officials worry that he is undermining traditional Japanese labour practices that, they believe, serve the country well by maintaining loyalty and equality. They would prefer to return to a world in which regular employment is the norm. Freeter, choose your own destiny

Mr Nambu regards this as sentimentality that is out of place in the modern, global economy. The post-war period was a time when people had no alternatives: “Be a regular worker—and exploited for the rest of your life,” he explains. Rather than undermining Japan's social ties between employee and company, he says, he is empowering workers by giving them more choice and flexibility. At a youthful 55 years, Mr Nambu has expounded this viewpoint in a dozen books about business practices and workforce trends. And it has guided his own life. A freeter himself before the term was coined, he juggled odd jobs at a department store and a school while laying the foundations for his firm.

Pasona has expanded into other areas of workforce services. Some 40 subsidiaries handle outsourcing projects, recruitment of full-time staff, outplacement support to help redundant staff find new jobs, technical support, finding temporary jobs for the retired, and managing benefits schemes for other firms. Pasona has also expanded into other Asian countries and America. (It has around 4,000 staff, 75% of whom are regular employees.)

When The Economist last caught up with Mr Nambu in 1996, his office was adorned with photos of himself alongside such dignitaries as Bill Clinton, Prince Charles and Ronald Reagan—but no Japanese politicians, a sign of his status as an outsider in his own country. In the decade since, Pasona's revenues and temporary workforce have both more than doubled, yet Mr Nambu remains as controversial as ever. “The concerns I had 30 years ago, I solved by creating the human-resources department of Japan, Inc,” he says. But the battle continues.

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