Young Japanese workers jump ship as cuts backfire
By Ann Saphir
Bloomberg News Service
TOKYO — Masakatsu Kohama's colleagues have held a farewell party each month at Oki Engineering Co. since the company started offering three years' pay to older managers who agree to quit. Just one was for someone over 50.
The 32-year-old engineer handed in his own resignation this month, joining an exodus of young workers disgruntled by a flood of long-serving managers sent from parent Oki Electric Industry Ltd., where on reduced salaries they bide time until they retire.
"The parent company has turned us into a dumping ground where they shove people they don't need," said Kohama as he picked at his chicken and rice lunch earlier this month. "It's not a stimulating place to work any more."
Kohama's case reflects a flaw in the 65,000 job cuts announced by NEC Corp, Toshiba Ltd. and other technology companies in the past six months that analysts say may stop Japan Inc. from reaping the efficiency gains targeted. Instead of firing underperformers, almost all the cuts are achieved by offering incentives for older workers to quit or shifting them to lower-paying subsidiaries. Many of the worst workers are happy to sit tight.
"With three- to five-year restructuring plans, employees begin to lose faith the company will ever emerge healthy," said Fumihito Gotoh, a bond analyst at Merrill Lynch Japan Securities Co. "The more talented employees are, the more likely they are to leave. There's no way to avoid a decline in competitiveness."
Kohama, who spends evenings surfing the Web on his lime-green iMac and wants an Internet-related job, wasn't the kind of worker Oki wanted to leave. He turned down a request from his boss to reconsider.
Atsushi Mori, Oki Electric's chief spokesman, said "an older work force doesn't necessarily detract from a company's vigor." The engineering consultancy needs experienced workers, he said, and the software and communications subsidiaries are hiring new graduates.
"I don't think one person's story really reflects the overall company," said Mori. "We're working hard to keep up morale. I don't think our best workers are leaving."
The seeds of today's troubles were sown before Kohama was born. In the 1960s and 1970s, Japanese companies hired armies of recruits straight out of university to fuel the nation's rapid expansion from the ruins of World War II to the world's second-biggest economy.
Most of those people have stayed on even as Japan limps through its third recession in less than a decade.
Companies have been slow to trim staff and even now are opting for costly incentives to get workers to quit, in part because they want to avoid expensive lawsuits for wrongful dismissal, said Tom Nevins, president of labor consultants TMT Inc.
While Japanese laws don't prohibit firing staff, court rulings have run four-to-one in favor of dismissed employees against their employers the past five years, said Nevins, who has spent a quarter of a century helping foreign companies get rid of workers in Japan.
So instead of firing, companies entice workers to leave. Matsushita Electric Industrial Co. last week said it will pay about 9 million yen per person to eliminate 13,000 jobs this year. Hitachi Ltd. will take a 110 billion yen ($820 million) charge to pay for job cuts this year as it offers as much as 2 1/2 years worth of pay as incentive to quit.
Companies like to spread job cuts over several years, allowing attrition to account for most of the reductions. Another strategy is to shift workers to subsidiaries, taking them off the books of the parent company.
Nippon Telegraph & Telephone Corp. is shifting 100,000 workers to lower-paying jobs at subsidiaries to save money. Japan's biggest telephone company also is offering workers over 40 up to 22 months salary to quit.
Oki, which expects a 33 billion yen loss ($246 million) this year, increased incentives in November to entice 1,600 people to quit. Workers over 40 will get as much as 3 1/2 years' salary if they quit by March 31. That's not enough for some. With unemployment at a record 5.6 percent, middle-aged workers who have spent most of their life in one job are worried they won't find another one. The payouts aren't enough to retire on in one of the world's most expensive places to live.
"After 35, job availability suddenly dries up," said Yuji Genda, an economics professor, who wrote about the loss of morale among younger Japanese in his best-selling "Vague Anxieties at Work: Today's Wavering Youth."
Kohama's tale is "typical of what's happening at big companies," Genda said. "Young workers can't see any future. They don't know when this weight will be taken off, so they are getting out."
