Japan’s temps may get new deal, of sorts

The second coming of Haken Mura (dispatched workers’ village), temporary holiday accommodation for Japan’s growing number of laid-off haken (dispatched) workers, attracted less public attention than its 2009 incarnation.

“Big” stories, such as the alleged corruption involving ruling party leader Ozawa Ichiro, or the US-Japan spat over where to put American Marine helicopters in Okinawa, pushed the plight of unemployed, homeless workers from the front pages. The news value of this year’s compassionate protest, which ended on January 18, was to some extent also diminished by involvement of the Ministry of Health, Labor and Welfare (MHLW).

A year ago, the ministry was embarrassed by the encampment just across the street from its offices. Aided by non-profit organizations and labor activists, 500 displaced temporary workers took up residence, receiving food, emergency shelter, and employment assistance during the New Year vacation. Ministry officials this year arranged a move to a less prominent location at the Olympic Center in Yoyogi Park.

Despite the diminished publicity, hundreds again took refuge and many more consulted with lawyers who staffed a phone hotline and consulted face-to-face with workers about abrupt lay-offs, contracts not honored, and salaries not paid. Reports quoted workers who said that they preferred to talk with lawyers because the MHLW bureaucrats were unable to answer their queries constructively.

Official Japan has been loath to reveal that its statistics show labor market liberalization contributing to increased inequality and poverty. Publication of MHLW-collected poverty data had previously been left to the Organization for Economic Cooperation and Development. But, with the effects of labor deregulation becoming too obvious to disown, the MHLW this week published poverty statistics for the first time.

They verified earlier surveys indicating that one-sixth of Japanese live below the poverty line; 59% of those in poverty are single parents, the majority of them “working poor”, employed in the second tier of Japan’s labor force, which is made up of dispatch temporary workers and others who comprise the category of “non-regular employees”.

Dispatch workers

Dispatch labor was first deregulated in 1985. Growth of the temporary staffing industry was slow at first but picked up dramatically after layoffs and reduced hiring of new graduates following the collapse of the Japan’s economic bubble and the start of the decline of so-called lifetime employment. Today, nearly four in 10 Japanese workers are “non-regulars”. Their salaries and benefits are typically estimated at half of regular workers’ total compensation and their jobs are much less secure. Haken are leading the way to a lower wage floor, more-unstable working conditions, and greater social divisions.

The problem became more visible after 2004, when another round of labor deregulation allowed dispatch workers to be used in manufacturing, the backbone of Japan’s export-based economy. Previously, manufacturing had been carried out by full-time, regular workers, whom companies and their affiliated subcontractors took some care to train and retain. Pressured by more than a decade of economic stagnation, and influenced by neoliberal examples set forth in position papers issues by the American Chamber of Commerce in Japan, key Japanese business leaders embraced “flexibility” and “diverse 21st century ways of working”, and moved away from Japan’s putative tradition of long-term, in-house human capital development.

The 2004 deregulation allowed manufacturers to cut costs by legally using dispatch temporary workers. Moreover, when work dries up, such non-regulars, who seldom have union representation, have the added advantage to employers of being easily, if controversially, dismissed, pulled off the line like surplus tools. Labor leaders and social activists argue that dispatch temporary workers are not machines but human beings, who need regular incomes for stability.

This haken issue has aroused strong passions about the future direction of Japanese labor practices and the shape of society in general. Firms claim they need flexible employment to survive and prosper. Advocates for workers argue that without respect and stability, the workforce cannot survive humanely or afford to raise families. The treatment of haken workers is the visible tip of a much larger iceberg of unstable, non-regular employment.

Who is responsible for haken?

Companies that use dispatch labor have contracts with staffing agencies that supply temporary labor. On paper, the workers are employed by the agency, which takes a cut of the fee paid by the firm as compensation for finding and dispatching the worker. The agency is responsible for pay and benefits, as well as for directing the work of the dispatched workers. In practice, once agency temporary workers enter a workplace, particularly in factories, they often take orders directly from the company and face pressure to work like regular employees. This includes pressure to work unpaid overtime.

Such violations of the law have become clearly visible only recently. A spate of lawsuits and protests, such as the haken village, industrial accidents involving inadequately trained haken factory workers, and homeless haken workers sleeping in Internet cafes and 24-hour fast-food restaurants, have made the problems clear.

When firms that use haken labor face harsh economic conditions, they can terminate their contracts with the suppliers of the labor under specified conditions. The workers, many of whom are living hand-to-mouth in company-supplied dormitories, have no recourse against this sudden termination, which may come before the expiry of their personal contracts with the temp agency. Upon termination, they are obliged to leave their company lodgings. Individual contract workers face the same dilemma.

The government is worried about layoffs of such vulnerable workers and has made efforts to find housing for those who have lost jobs. It has also expressed concern that this style of work will continue to spread, increasing poverty and making family formation more difficult. There is fear that irresponsible treatment related to haken workers will become institutionalized. Illegal variants of haken are increasing and the number of companies being disciplined for violating the current law is growing.

At issue is a legal distinction about who bears responsibility for managing workers. The practice of treating workers like non-regular, haken workers when it comes to salary and dismissal, but treating them like regular workers when it comes to duties and hours is illegal. Workers at subcontractors (ukeoi) may remain employed by their firms even when contracts with larger firms are terminated. However, when haken contracts are terminated, the haken agencies seldom assume responsibility for workers. Indeed, haken agencies sometimes fail to pay all wages due. The agencies may also skim additional fees from workers’ pay or neglect to pay social insurance payments that workers must make in order to be eligible for unemployment benefits.

Laid-off haken workers thus fall into a gap where there is little or no safety net. Some workers have tried to fight dismissal, arguing that the firms in which they have been working have an obligation to keep them there. Some have worked beyond the statutory time limits for temporary labor, and many have been taking orders directly from the firm’s bosses just like the regular employees.

They have argued that in such a situation, a tacit contract between the worker and the firm exists and that it should take precedence over the dispatch agreement between the staffing agency and the firm. But officials in companies that use haken labor have refused even to accept worker petitions or meet with such dismissed haken workers. Firms say, “You don’t work for us so we are not responsible for you.”

Proposed reforms to protect haken workers

To stem the rising tide of inequality, the new government of Prime Minister Yukio Hatoyama is to introduce a legislative proposal to re-regulate the use of dispatch workers as part of an overhaul of the Labor Standards Law when parliament opens on January 26. The aim is to protect haken workers from sudden forced dismissal, and to redress the perception that bureaucratic inaction has transformed haken workers into the working poor.

The reform aims to strengthen worker protections and restore “regular” employment as the norm by eliminating loopholes currently exploited by employers, and providing swift and appropriate punishment of future violations.

Under the proposal, temporary staffing agencies that hire workers for a certain period (currently unspecified) will have a duty to make effort to shift those workers to “regular” employment status. When considering the wages of haken workers, equivalence with the salaries of the regular workers in the firms to which they are dispatched will be considered. The charges for dispatching workers will be made clear to workers and agencies will be required to make public the margin they take, that is the often sizable difference between the dispatch charges paid by the firm to the agency and the wages the agency pays to workers.

Under the proposed revisions, only dispatch for regular employment would be permitted. Dispatch for short terms of less than two months, dispatch of day laborers, and dispatch in manufacturing are to be banned “in principle”, as is dispatch for replacement of regular workers. So-called touroku-gata haken, the dispatch of workers who register with the agency and are called upon when there is work, will also be banned; however, there will be exceptions in 26 selected occupations. Clearly, the aim of the proposed revision is to increase regular employment and determine the locus of responsibility for worker welfare.

But the way forward is not clear. The 26 “specialized” occupations to be exempted currently employ about half of Japan’s 2.2 million dispatch workers, and lawyers say the vague definitions of the exempt occupations will invite abuse and undermine the effectiveness of the proposed law. Furthermore, some, mostly young, workers appreciate the freedom and relatively lucrative nature of haken. In consequence of the temporary nature of the work, it usually pays slightly more than working for subcontractors, which have higher fixed costs than temp agencies. Nor does haken entail the long hours or heavy demands of regular employment.

Furthermore, the proposal does not obligate firms to negotiate collectively with unions on issues related to dispatched workers, nor would firms that use dispatched labor be obliged to share responsibility for unpaid wages or benefits. Vague definitions and the as yet undetermined time period for implementation of the reforms are other likely sticking points.

As for sanctions, if firms knowingly violate the new law, treating haken labor as subcontract labor, the MHLW will regard the situation as an implicit labor contract. Workers treated thus will have the option of asking to be hired directly and firms will be obliged to hire them. However, it is important to note that the Supreme Court recently ruled against a worker in just such a case, establishing a precedent that poses a preemptive challenge to this portion of the revision. The ultimate form of the proposal will be shaped by debates in and out of the Diet, or parliament, over the coming months.

For their part, employers, too, find problems with the proposal. They argue that if touroku haken is banned, it will produce a flood of layoffs, increasing unemployment. They say that the proposal will be especially harsh for smaller businesses, which do not have enough steady work to justify hiring subcontractors and so depend on being able to bring in registered temporary workers on short notice when they need additional hands.

As the working class goes, so goes Japan

It is clear that the boom in temporary staffing agencies has been instrumental in widening the working-class divide. A class of non-regular workers, who often do the same work as regular workers but receive lower wages and enjoy less stability, has been the outcome. Consequences include the increase in dispossessed individuals, families living on the edge, damaged pride, increasing anger, a sense of real betrayal, and the stirrings of class conflict in a country that has long prided itself on keeping class differences obscure.

Rallies and study sessions are planned around the country in the coming months so that workers can study the proposal and voice their opinions. Labor advocates see the proposed haken reform as at best a piecemeal effort. If enacted, it will be impossible to repeal, and its loopholes will become part of the social fabric.

Workers who feel they are being used illegally will continue to have little choice or recourse. Penalties for labor law violations are generally limited to administrative guidance and warnings. These activists argue that fundamental reform is needed. They say that only guaranteeing all workers equal legal rights and status can neutralize employers’ current incentives to abuse both low-status workers and the law.

The revised law’s name and goal are the same: “Protection of Dispatch Workers”. However, at issue are not just conditions for haken workers but Japan’s system of employment in general. Many workers today are forced to accept unstable, non-regular employment even though they would prefer the long-term stability of regular employment. There are more than 3.5 million unemployed, many eager for any work at all. And there is a minority who favor non-regular work because it fits their lifestyle goals. They do not want the burdens of regular employment, but they may find their chosen occupation on prohibited haken list.

The debate over proposed haken and other labor reforms is of crucial importance to Japan’s future. The shape of the society is implicit in the outcome. It is a story that should be able to challenge the Okinawa base squabbles and the endless rounds of political corruption for front-page space.