1.1 The origins of the model

1.2 The evolution and changing character of the Japanese model

2.1 Major epochs

2.2 Current labour market policies

3.1 Industrialisation, labour market problems, and labour policies

3.2 Labour shortages and human resource development policies

4.1 The system of labour law

4.2 Economic development, labour market problems, and industrial relations policies

4.3 Policy towards labour shortage

Foreword

It is easy to appreciate that labour market policy in the period of economic recovery (1945-54) focussed on anti-unemployment measures. In 1947 the Ministry of Labour was established and the pre-war Employment Placement Law⁽²⁾ was replaced by the Employment Security Law, and at the same time the Unemployment Insurance Law (1947) set up a system of unemployment insurance, and which is a major development when one considers that before the war there was no such system. In addition, in 1949 the Urgent Unemployment Measures Law was enacted. This was intended to absorb the growing numbers of unemployed workers directly into the government's unemployment measures programme agency. At the time "these three laws which were passed under firm instructions from GHQ" were known as "the three employment security laws" (Nakajima 1988:171).

Of these three laws, the Employment Security Law had the effect of strictly excluding from the business of supplying workers the private agencies which had had a very large role in pre-war job placement. That is to say, GHQ, which was concerned to democratise Japan, attached great importance to the development of "healthy trade unions" and "elimination of undemocratic labour practices", and strove so far as possible to prohibit the old system with its danger of exploitation by middlemen and forced labour. In consequence, all worker supply organisations other than trade unions were prohibited (Article 45)⁽³⁾ . Moreover, an amendment to this law in 1949 established a system of collaboration between the public Employment Security Offices and schools, and permitted schools to operate free job placement services on similar lines to pre-war models.

The Urgent Unemployment Measures Law embodied a system similar to the measures taken to cope with large-scale unemployment which arose in the first half of the 1920s. In 1925 the government established winter unemployment relief offices in six major cities. The background to this was the government's anxiety in the face of "social unrest" fermented by rising prices, the influx of impoverished farmers into the cities, and large-scale lay-offs and the struggle caused by resistance to these lay-offs.⁽⁴⁾ These unemployment relief programmes⁽⁵⁾ arranged employment for unemployed workers introduced by employment placement offices, at daily wages which were lower than the local norm, mainly in public works such as road-making, water supply and drainage works, and the construction of bridges or re-building of embankments. The unemployment relief measures were in practice a means for the government to provide work opportunities for day labourers.

The content of the post-war anti-unemployment measures closely resembled these pre-war unemployment relief provisions. Direct employment by the government of day labourers, their placement by employment security offices primarily in public works projects at rates of pay lower than the locally prevailing norm: in all these respects the arrangements were the same as the pre-war measures. In the context of the severe post-war economic conditions, unemployed job-seekers were able at least to make a living, if not to find secure employment, by means of the day-labour-work found for them by the public security offices. However, the scale of the programme was insufficient to meet the demand for work. This led to a movement directed at the public employment security offices and related bodies, involving mass demonstrations, petitions, sit-down strikes and hunger strikes, known as the "'Give us jobs' struggle" (Nakajima 1988: 178). The numbers of those seeking work as day labourers who were registered with the employment security offices rose from an average of 160,000 in 1949 to 410,000 in 1950. It is thought that "About 70 per cent of those seeking such work were found employment through the anti-unemployment provisions" (Endo 1976: 65). In this sense these measures made a major contribution to easing the serious unemployment situation.

The impact of high economic growth

As seen above, by the mid-1950s the Japanese economy had returned to pre-war levels. Workplace conflict, and the struggle embodied in the call to defeat the system of enterprise unions, declined; and the ideology of class struggle was dealt a fatal blow by the failure of the Mitsui Miike dispute. The background to this was the rise of a mass consumer society symbolised by the expression "Three sacred treasures" (black and white television, electric washing machine, and electric refrigerator). Society became increasingly more urbanised and educational qualifications assumed growing importance.

The leadership of the "spring offensive" in wages bargaining which began in earnest in 1956, was at first centred on the private railways and public employees unions, but shifted to the metalworking sector such as steel, shipbuilding, electric machinery and car industries (in other words from the protected or shelter to the competitive sectors) and in due course the expression JC (IMF-JC) Spring Offensive came into general use (the IMF-JC being set up in 1964). In 1964, eight years after the Economic White Paper had declared that "The Post-war period is over", Japan in the course of one year joined the OECD, acceded to Article 8 of the IMF, held the Tokyo Olympics, opened the Shinkansen high-speed train line, and experienced a labour shortage of young workers. The Toyota production method had already come into use. Japan had become a major industrial nation, and there was pressure for liberalisation of trade and capital, and recognition of the need to move to an open economy: the 1964 Economic White Paper was entitled "The Japanese economy in an open economic system". This spurred the reorganisation or modernisation of sub-contracting in assembly manufacturing industries. It was also this period which saw the development, in response to capital liberalisation, of the system of interlocking shareholdings among major firms which continues to underlie the present system of corporate governance.

This period was also marked, in parallel with development of the heavy and chemical industries, the changes of industrial structure, employment structure, industrial relations, and unprecedented technological innovation (this term was first used in the 1956 Economic White Paper mentioned above), as well as the rise of the consumer society with the energy revolution symbolised by the decline of the coal industry and the setting up of large oil industry conglomerates.

Changes in the labour market may be summarised as follows: first, talk of excess labour supply and disguised unemployment died away and was replaced by concern with labour shortages, specifically of young workers and technically skilled workers. Economic growth meant that the balance of supply and demand for labour was much improved, the turning point coming in 1964 when, even if one excludes new school-leavers, the number of those newly seeking work was exceeded by new offers of work. The overall unemployment rate also improved continuously from 2.5 per cent in 1955 to 1.1 per cent in 1964. This was an epoch-making development when one reflects that, as already implied "Except for the war years Japan had always worried excessively about overpopulation and had devoted itself to dealing with unemployment" (Nakajima 1988: 221).

Secondly, high economic growth led to a gradual decline in the dual structure of employment, and raised the possibility that it might disappear. Thirdly, despite this there was a considerable imbalance in the relationship between labour supply and demand according to age, industrial sector, region, and types of work. Fourthly, related to this, there was a large rise in the urban population, as a result for example of the decline of the coal industry, the new growth in demand for labour as a consequence of the growth of heavy chemicals industries in urban centres, and the movement of the work force from farming villages to the cities. Fifthly, the changing industrial structure led to a substantial increase in the rate of the employed to the total, from 41 per cent in 1955 to 59 per cent in 1960, in other words an increase of nearly 20 per cent within 10 years. Sixthly, there was a striking fall in the relative importance of the pool of excess labour supply provided by primary industries halving from 48.3 per cent in 1959 to 24.6 per cent in 1964, and a similar rise in the numbers of those employed in the secondary and tertiary sectors (cf., Endo 1976:68-74; Seki 1986:396-404; Koshiro and Rengoso eds. 1995:306f.).

The Vocational Training Law and measures

for former colliery employees

What impact did these changes in industrial structure have on the government's labour market policies? Two aspects of policy in the latter half of the 1950s command attention. One is the measures taken to deal with those made unemployed as a result of the decline in the coal industry. These included the Coal Industry Rationalisation Temporary Measures Law (1955) and the Former Colliery Workers Special Measures Law (1959). In order to help former miners to find work, they were given detailed guidance and a programme of job placement over a wide area and assistance with moving was implemented.⁽⁶⁾ Many miners left their home towns and moved to the Tokyo-Yokohama and Kyoto-Osaka-Kobe areas were they found work in the manufacturing and construction industries. These elaborate procedures and their results "deserve to have a large book devoted to them" in the annals of employment security administration (Nakajima 1988:219). The distribution of older workers between regions and industries was re-allocated in the context of the changing industrial structure.

In 1958, the Vocational Training Law was enacted. This provided for: (1) public provision of vocational training; (2) training at the workplace; and (3) skill certification. Economic growth and the changing industrial structure had led not only to a shortage of younger workers, but also to a qualitative change in the kind of workforce which was required. As the shortage of skilled workers became apparent the need arose to raise skill levels in the workforce. The government was faced with the need to replace the existing system of job instruction provided by the employment security administration (public vocational training) and technical training conducted by the standards administration (training within enterprises) by something more in tune with the training needs of workers and industry (Sumiya and Koga eds. 1978:81f). Of the above three elements of the new law, (1) namely public vocational training, derived from the wartime vocational training enterprises and facilities and the "job instruction" policies under the Labour Standards Law (1947), and in reality tended to be an unemployment relief measure focussing on school-leavers without jobs and other unemployed workers (Sumiya and Koga eds., 1978:25-8; Japanese Vocational Training Association 1971:322f.). The second set of provisions, (2) on training within enterprises, was based on the regulations for the training of skilled workers under the Labour Standards Law (1947).⁽⁷⁾ However, these regulations, although they purportedly dealt with vocational training, in fact were aimed at eliminating "the evils of the apprenticeship system" and "sweated labour", and in that sense were rather "backward-looking". Therefore, despite the use of words such as public vocational training and training within enterprises, the actual content of these provisions was remote from the new training needs and qualitative and quantitative skilled labour shortages which economic growth had brought about⁽⁸⁾ .

The enactment of the Vocational Training Law was intended to bring about, in tune with requirements of the new era, a major overhaul of the obsolescent public vocational training and "backward-looking" regulations on vocational training within enterprises, and to create an organic synthesis with the newly-established skill certification system. It also meant that the administration of vocational training was made independent of labour standards and employment security administration. At the same time as this Law was passed the Vocational Training Division was set up within the Employment Security Division, and three years later, in 1961, it was given the status of a separate Bureau, the Vocational Training Bureau (Nakajima 1988:241).

From anti-unemployment measures to active employment policy

As described above, the labour market policies of the economic recovery period were fundamentally aimed at unemployment, against the background of enormous disguised unemployment and excess labour supply⁽⁹⁾ . This is symbolised by the "three employment security laws" referred to above. At that time unemployment was the greatest problem of labour market policy, and the alleviation or elimination of unemployment was a priority objective, along with economic and industrial recovery, so much so that the government resorted to direct employment of those seeking work.

In order to understand the government's labour market policies at the time it is necessary to take account of the perceived need to prohibit and suppress traditional pre-war employment practices such as "sweated labour" under cover of training within an enterprise or job placement by worker supply businesses. The influence of GHQ had a lot to do with this.

However, policies aimed at unemployment and the suppression of old customs were not suited to cope with the new needs which arose from the striking economic growth which followed. The fundamental employment problem shifted gradually from being one of unemployment to one of labour shortage, and in parallel with this new thinking on employment policy became increasingly influential during the latter part of the 1950s, symbolised by the appearance of the expression "full employment". These new currents of thought were exemplified by such developments as The Five-year Economic Autonomy Plan "for the first time presenting full employment as the target of economic policy" (1955), the abolition of the Council on Unemployment Policy (1958), the establishment of the Employment Promotion Corporation (1961), the drastic revision of the Urgent Anti-Unemployment Measures Law and amendment of the Employment Security Law (1963). The objective of revision of the Urgent Anti-Unemployment Measures Law was to rectify the situation created by the old law whereby older workers were finding employment in unemployment relief projects as day labourers on a "regularised" and "established" basis, and instead to seek actively to promote their re-employment in the private sector, namely a shift to active labour market policy. There was vigorous resistance to this move by the trade unions affected, notably Sohyo and Zennichi Jiro, which opposed the dropping of the former unemployment relief system.

This fundamental change in policy thinking can be described as one "from unemployment policy to employment policy" (Takanashi 1982:37f.). The new approach was embodied in the Employment Policy Law (1966), "an epoch-making event in the history of Japanese employment policy".

What was epoch-making about this law? First, it was the first time that the achievement of full employment was stated by law to be a government objective, and it thereby gave rise to the adoption of the First Employment Measures Basic Plan (1967-1971). (The successor to this plan, the Eighth Employment Measures Basic Plan is currently in effect). Secondly, in place of the position subordinate to economic and industrial policy which labour market policy concerned solely with unemployment had come to assume, the new emphasis on full employment enabled labour market policy to make positive demands on economic and industrial policy by giving it a rationale of its own, and raised the prospect of aiming for a co-ordinated policy approach.⁽¹⁰⁾ Thirdly, it brought the elements of labour market policy into a coherent whole, stressing the need to correct the various imbalances between labour supply and demand; and, in addition to the Employment Measures Plan, it strengthened job placement provisions, introduced a system of transitional subsidies for job changing, secured training arrangements for technically skilled workers, and promoted employment for older and physically handicapped workers.

To sum up, the heart of the Employment Policy Law lay in the setting as goals of government policy the achievement of full employment, the recognition of a specific rationale for labour market policy and the co-ordination of labour market policy with economic and industrial policy, and the correction of imbalances in labour supply and demand, together with the concomitant systematic planning of labour market policy; and it can thus be regarded as "the basic law on employment policy" (Nakajima 1988:226).

Incidentally, the Employment Policy Law may be regarded as a Japanese version of ILO active employment promotion policy or OECD active labour policy. Indeed the ILO agreement on employment policy (1964) and recommendation on employment policy (No. 122), and the OECD board of directors' recommendation on labour policy to promote economic growth (1964) were important factors in its enactment (Endo 1975:9;Endo 1976:85).

Japan's subsequent labour market policy progressed largely along the route which had been paved by the Employment Policy Law. As stated above, the law incorporated the expression active labour market policy, and it was this which gave the Japanese model of labour market policy the form it has come to take (Sugeno 1997:69f.) .

Some illustrations of subsequent measures and legislation along these lines, notably including the Employment Security Law (1974) and the Revised Vocational Training Law (1978), as well as many others, such as: the establishment of the "human resource bank" (1967) which provides a public job placement service for managerial and technical workers, offering real-time wide-area (starting with Tokyo and Osaka 1969) job placement to extend job security functions and makes possible individual search with the aid of a display monitor; the setting up of a job-change subsidy system to improve the balance of supply and demand for older and handicapped workers by supporting them in moving to new kinds of work (1969); the radical revision of the old Vocational Training Law.⁽¹¹⁾ and the adoption of the First Basic Plan on Vocational Training (1971); the establishment of the Vocational Research Institute being a precursor of the present the Japan Institute of Labour (1969); and the Older Workers Employment Promotion Special Measures Law (1969), the forerunner of the later Older Workers Employment Security Law (1986), the Worker Capital Formation Law (1971) and other legislation.

From the Unemployment Insurance Law to the Employment Insurance Law

In emphasising the importance of the Employment Policy Law, one should not overlook the comparable "historic" importance of the Employment Insurance Law (1974), which "aimed to implement the principle (i.e. of achieving full employment) enunciated by the Employment Security Law" (Endo 1975:13). It replaced the Unemployment Security Law, embodying a new set of ideas.

What was "historic" about this law was that it established, in addition to unemployment benefit payments, three programmes known collectively as "the three employment insurance programmes", namely the employment security programme, the skill development programme, and the employment welfare programme. The important thing about these programmes⁽¹²⁾ was that the funds necessary to implement them were separate from the unemployment benefit funds and were derived entirely from employers' contributions (3.5/1000 of total pay). In other words, the Employment Insurance Law, by "making it possible for employment policy to have its own funding," (Endo 1975:13) was in that sense indeed historic.

The first of the new programmes, the employment security programme, had at its core measures giving support to employers to promote the employment of older workers and the raising of the age at which they were required to retire, and the creation, by providing for change of workplace and other steps, of new employment subject to regional and seasonal variations as well as age considerations. The second programme, the skill development programme, supported and subsidised employers and employers' organisations, as well as local governments, for employee training in the private and public sectors and for skill certification. This marked the first systematic provision to employees of paid leave for training purposes. The third programme, the employment welfare programme, gave assistance to employers for setting up or expanding provisions for employee welfare, and in the establishment and administration of accommodation for workers who had been obliged to change their place of residence in order to start work. All of these measures can fairly be called active labour market policy.

These three programmes, for employment security, skill development, and welfare, were all directed at improving job opportunities and working conditions by assistance to employers. Precisely for this reason the necessary funds for the programmes could all be taken from employers' payments of employment insurance.

There are several points worth noting about the influence on subsequent labour market policy of the first of the three programmes, the employment security programme. It encompassed systems of subsidy and support payments for the extension of the retiring age, for employment of older workers, for regional employment promotion, for re-employment of former workers in specified industries, for child-care leave, and so on. It was aimed at providing means, acting through employers, to solve the problems which the Employment Policy Law had stressed of imbalance in labour supply and demand according to age, region and industry. The retiring age extension subsidy system was directed at small and medium enterprises, and the older worker employment subsidy was directed at such enterprises which provided regular jobs for workers of 55 or over who had been placed through the public employment security offices. Both systems thus were focussed on small and medium enterprises. Thus, in addition to the unemployment insurance, job placement, unemployment relief projects and vocational training, a new item - job creation - had been added to the tool-kit of labour market policies.

Some explanation is needed of the employment adjustment steps taken in response to the first oil crisis (cf., Sugeno 1997:49f.) , in particular the system of employment adjustment payments, and the relationship between these steps and Japanese employment practices. At that time there was already a strong preference for responding to economic fluctuations arising from changing business conditions or the rapid alterations in the world economic situation by eschewing immediate lay-offs of regular employees, except as a last resort, in favour of reductions in overtime, re-allocation of workers within enterprises, suspending or reducing the hiring numbers of new school-leavers or workers in mid-career, and reducing dependence on sub-contractors, and - only if these measures proved insufficient - of voluntary redundancies, particularly of older workers (and even in these latter cases substantially increased leaving payments and assistance in finding new employment was regarded as part of a firm's social responsibility). The system of employment adjustment payments provided a means whereby, in accordance with Japanese employment adjustment practices, even if business conditions meant that an employee had to be temporarily laid off, "by reducing the burden on firms of paying closure allowances, steps could be taken to prevent unemployment before the stage was reached were the workforce had to be cut" (Endo 1975:70). Not only during the severe recession induced by the oil crisis, but also continuing to the present day, in periods of recession firms are eligible, with the authorisation of the Ministry of Labour to receive employment adjustment payments (two-thirds of closure allowances in the case of small and medium firms and one-half in the case of large firms). These payments are made to firms which are considered to be making efforts to sustain employment. In reality, in almost all such cases, although nominally laid off, employees continue to go to work for training and other purposes.

This system of employment adjustment payments, like the system for promoting extension of retiring age, can be regarded as a deliberate policy measure by the government to support the mature stage of Japanese employment practices by maintaining, so far as possible, opportunities for full-time employment. It is noteworthy that this is a major policy programme which directly involves firms' employment practices and internal labour markets. More generally, the three programmes set up under the Employment Insurance Law have come to mean that the government's labour market policies, in the form of unemployment prevention and employment creation, are directly and intimately related to the character of firms' personnel management. As far as the implications for Japanese employment practices are concerned, this relationship involves policies aimed at supporting and promoting long-term stable employment by government support and inducements (to put it the other way round, it would be a matter of concern if older workers' future employment prospects were left entirely up to the free will of firms). This may be regarded as having come about as a result of, on the one hand, the specification of the achievement of full employment as a government objective by the Employment Policy Law and the continuation of the Employment Measures Basic Plan; and on the other hand the difficulty (against the background of Japanese employment practices) which older workers can encounter in finding work and thereby contributing to that objective, and the possibility of large-scale employment adjustment as a result of economic downturns which can lead ultimately to lay-offs and voluntary redundancies, particularly of older workers. These factors mean that the government is obliged to take concrete steps to preserve and expand older workers' employment opportunities, including the restraint of unemployment in firms' employment adjustment activities and the promotion of job creation.⁽¹³⁾

The third of the employment insurance programmes, the skill development programme, incorporates the following four components: first, support for public training facilities, and for enhancement of training content, aimed at life-time education (initial training, further training, skill re-development training, and so on); second, subsidies to employers of workers undergoing in-service training (aimed mainly at small and medium enterprises and including subsidies for certification training, for vocational training maintenance, and to support paid leave for education or training purposes by employees); third, payment for classes and training for job-seekers and workers facing a change of job; and fourth, funds to support equipment and administrative organisations for skill certification systems.

In addition, a revised Vocational Training Law was enacted in 1978. The essence of the revision was fourfold: a shift in the focus of the training system from one based only on public provision to one which assimilated both private and public elements; a move from legally specification of training to one which embodied greater variety; a replacement of training based on narrow definitions of skills by technically defined job categories to a broader concept of skill development and enhancement; and the promotion of lifetime education and training rather than basic vocational training centred on school leavers (Iwasaki 1979: 158-65). The thinking behind this substantial revision reflected a recognition that "in reality the training of technically skilled workers had come to be conducted in the framework of 'human resource development directly provided by employers in the workplace', separately from the vocational training programmes which had been planned", and conversely that "the content of publicly provided vocational training tended to lag behind the skill and knowledge requirements of industry". Moreover, "essentially, since it is desirable that the contents and methods of training should be ones which management and workforce consider appropriate in responding to employment trends, there were not many industries or types of work where policy intervention was necessary". Therefore it was judged that "What was primarily called for was an expansion in the provision of training by private and other employers". In addition, the Ministry of Labour came to the view that "in preparing for the future emergence of a service-oriented economy, there is less need to plan for vocational skill development and enhancement of technical workers than to provide for the skill requirements of workers who will join the tertiary sector, which accounts for a large proportion of the workforce " (Iwasaki ibid.; Endo 1975:132).

Summary

We have briefly re-traced the course of labour market policy from the post-war period to the Employment Policy Law and the Employment Insurance Law which put its intentions into effect. It may be helpful at this point to recapitulate, incorporating a few economic generalisations.

(1) Post-war Japan's labour market policies began to develop with the three employment security laws, which were enacted under the harsh conditions of post-war economic collapse, enormous demand for employment, excess labour supply, and huge hidden unemployment. Beginning with the passage in 1947 of the Unemployment Insurance Law and the Employment Security Law, and in the same year the establishment of the Ministry of Labour and the enactment of the Labour Standards Law, the process was continued with Urgent Unemployment Measures Law in 1949. These three employment security laws are signs of the seriousness with which unemployment was viewed and the urgency of the problem.

It is particularly impressive that the anti-unemployment measures, whose origins can be traced back to the experience of large-scale unemployment in the 1920s, continued to exist for such a long time (until 1955). The problem of unemployment on a massive scale could not be effectively tackled by normal job placement procedures for offering work opportunities. Thus the government had to take urgent measures, notably the direct employment of unemployed job-seekers as day labourers on public works projects. These constituted the major part of the unemployment relief projects. In passing, as we noted, GHQ exerted a strong influence in the enactment of these laws.

(2) The subsequent course of developments in labour market policy was marked by the Vocational Training Law of 1958. The background to this was the quantitative and qualitative shortage of skilled labour to meet the requirements which economic growth and changing industrial structure had stimulated, and the inadequacy of the programmes of job guidance (in practice an unemployment relief programme) and technician training (whose content was governed by regulations based on the Labour Standards Law's intention of suppressing ("sweated labour"). In 1961 the Vocational Training Bureau established and made independent of the Employment Security Bureau.

As early as the mid-1950s policy-makers began to concern themselves with the achievement of full employment (Five-year Economic Autonomy Plan, 1955). But as the Report of the Council on Employment (1959) pointed out, this required a solution of the problem of disguised unemployment which aggravated the ills of the dual structure, and a large reduction in the numbers of those failing to find regular work. The problem of disguised unemployment was largely alleviated by economic growth based on the development of a heavy chemicals industry and technological innovation.

(3) The Employment Policy Law (1966) had a "historic significance" in post-war Japanese labour market policy in that it officially proclaimed the achievement of full employment as a major policy goal. This law and the related subsequent legislation may be regarded as having created the Japanese labour market policy model.⁽¹⁴⁾ These developments coincided, at the height of the period of rapid economic growth, with other major occurrences such as OECD accession, IMF Article 8 status, the Tokyo Olympics, the opening of the Shinkansen high-speed train service, the development of a shortage of young workers, the deterioration of the urban environment and pollution problems, liberalisation of capital and trade, modernisation of the sub-contracting system, re-organisation of corporate governance and the move to a more open economy.

The Employment Policy Law was "historic" in that it established full employment as a government policy objective and accorded an autonomous rationale to labour market policy, thus making it possible for a long-term systematic approach to such policy to be adopted, including co-ordination with economic and industrial policy, symbolised by the Employment Measures Basic Plans, which continue to this day.

The Employment Policy Law was recognised at the time as the embodiment of active labour market policy. Its enactment was based on Japan's domestic needs, but also reflected the strong policy influence of the ILO and OECD.

(4) Among the subsequent related items of legislation, the Employment Insurance Law (1974) and the Revised Vocational Training Law (1978) were of particular importance.

The former of these two laws furnished an independent source of funding, adding employment insurance to the former unemployment insurance, to channel subsidies and support to employers through the three employment insurance programmes (the employment security, skill development and employment welfare programmes). The employment security programme included subsidies for extending retiring age, for employment adjustment payments, for child-care leave allowances, and for regional employment promotion payments. The skill development programme provided an important addition to support for in-service training, in the form of paid leave for training purposes, on top of the enhancement of publicly provided skill development. Later the skill development programme was expanded by the Revised Vocational Training Law (1978). The policy idea embodied in this latter law aimed at fostering a move from directing support away from technicians and towards general white-collar workers, and from general training for young people towards an expansion of lifetime education; it also tried to shift the leading role in training away from the public provision of training and to give more emphasis and assistance to the role of the private sector in setting its own objectives and deciding how to achieve them. Policy-makers were very conscious of the predominant role of in-company OJT (on-the-job training ), provided by firms themselves, in human resource development. The subsequent Vocational Skill Development Promotion Law (1985) sought to take this line of thinking a step further.

Thus the three employment insurance programmes were characterised by the way in which they sought to enhance workers' job security, skill development and welfare by providing subsidy and support to their employers.

(5) What are the distinguishing characteristics of the Japanese labour market model as embodied in the Employment Policy Law and the Employment Insurance Law?

First, the continuing adoption of the Employment Measures Basic Plan as a means of evaluating the effectiveness of, and implementing, the official commitment to achieving full employment.

Second, the co-ordination of policy management, according the same degree of importance to labour market policy as to economic and industrial policy.

Third, the use by labour market policy, in furtherance of the goal of full employment, of employment security, job placement, skill development and job creation measures in order to correct imbalances between labour supply and demand according to region, types of work, sex and age.

Fourth, the implementation of labour market policy, as in the case of the three employment insurance programmes, through assistance and support to employers in aiming at improving employees' job security, skill development and welfare. For this purpose a fixed part of the employment insurance payments made by employers provides an independent source of funds.

Fifth, the Japanese labour market policy model takes account, both in planning and in implementation, of the existence of a free labour market and of established employment practices.

To sum up, the basic goal of labour market policy is full employment. With this objective in mind it lays stress on the performance of the free market (and consequently depends heavily, in matters of job security and training, on firms and on the operation of the market), and seeks to correct structural imbalances in labour supply and demand. The Japanese model may be said to be made up of the following components: implementation based on a continuous history of Employment Measures Basic Plans; co-ordination of labour market policy with economic and industrial policy; independent funding derived from employment insurance for support and subsidies offered to employers; specific programmes for employment insurance, job placement, skill development and job creation; and a neo-corporatist decision-making process⁽¹⁵⁾ .

(6) A study of the formation of the Japanese model suggests a number of points which are relevant to an international comparison of labour market policies.

First, Japanese labour market policy initially was concerned with the problem of massive unemployment, but in time shifted its focus towards the structural changes in the industrial structure and in the labour market which had been induced by economic growth. In particular, it was confronted with the problems of quantitative and qualitative labour shortages and of structural imbalances in labour supply and demand. In the early post-war the government went so far as to offer direct employment on unemployment relief programmes. However the basic orientation of the Japanese model is rather to accept the workings of the free market and the nature of firms' employment practices, and within this framework to try to deal with problems of structural imbalance which arise (and thereby to aim for full employment). This illustrates two structural dimensions of labour market policy. First, is there a problem of unemployment or of labour shortage? Second, is the problem to be solved by the government, or by firms and the workings of the market?

Secondly, as far as actual policy programmes are concerned, the government responded to the post-war unemployment problem not only by direct employment as an emergency measure (i.e. the unemployment relief programme), but also by organised systems of unemployment insurance and publicly provided job placement services. The vocational training system, as noted above, developed later than the unemployment insurance and job placement systems; in response to changes in industrial structure and in the labour market it was overhauled and enhanced. Still later the idea of job creation made its appearance. Unemployment benefit is now payable for a maximum of 300 days (older workers with many years of service) and a minimum of 90 days at up to 80 per cent of the workers' previous basic wage. Contributions have to be paid for at least six months in the year before benefit is claimed.

These five policy programmes and the order in which they were introduced reflect the trend from passive labour market policy focussed on the unemployed to active policies aimed at full employment. This illustrates the active/passive dimension of labour market policies.

Thirdly, the sense in which vocational training policy may be said to have "lagged" arises from the fact the workers' training was basically dependent on the human resource development processes in individual firms, and that policy-makers felt that the most effective way to contribute was by subsidy and support to the private sector. Support from training within firms was therefore one of the three main components of the Vocational Training Law (1958). This kind of policy thinking became more evident as the Japanese model became established.

1.2 The evolution and changing character of the Japanese model

We have considered the origins and distinguishing characteristics of the Japanese labour market policy model as it developed into the form it had taken by about 1975. We now turn to its subsequent course of development. Important legislative changes resulted from the difficulties experienced with intensified Japan-US trade friction, the recession caused by the yen's appreciation as a consequence of the Plaza Accord, and the bubble economy. This turbulence grew still more severe as a result of the very high level which the yen reached in the 1990s and the protracted economic recession. Nevertheless, the basic character of the Japanese model has not fundamentally changed.⁽¹⁶⁾

Before touching on the subtle changes which have taken place in the model over the past 10 years, it is necessary to say a few words about the relationship between the model and Japanese employment practices.

The Japanese model and Japanese employment practices

In some respects the Japanese labour market policy model is dependent on Japanese employment practices. Dore (1973) described these practices and the workings of Japanese industrial relations as "welfare corporatism". The practices of long-term employment and seniority related pay made a major contribution to bringing about full employment and assuring security for workers' livelihoods, and in that sense it may be said that functionally speaking these practices provided a partial substituted for a welfare state. The expression welfare corporatism described this relationship. But this is not all: an essential feature of Japanese-style employment is investment by firms in human resource development (cf. Inagami 1996), which makes vocational training policy dependent on the effectiveness of skill development in firms. This dependent relationship between employment policy and employment practices applies to job security, training, and the guaranteeing of workers' livelihoods.

However, there is another aspect of the relationship between the policy model and employment practices, which embodies a delicate antagonism. As already noted, the policy model is one which aims to rectify structural imbalances between labour supply and demand. The Ministry of Labour regards variations according to region, industrial sector, and types of work as sources of such imbalance. For example, the Law on Provisional Measures for Former Colliery Workers (1959) and the Laws on Provisional Measures for Former Workers in Specified Depressed Areas (1977) and on Provisional Measures for Former Workers in Specified Depressed Trades (1978), which were passed in the wake of the first oil crisis, exemplify attempts to deal with structural imbalances arising as a result of these regional and industrial variations (Kato 1987:60f.; Okabe 1989:91-107).

A further source of structural imbalances arises in relation to workers characterised by such ascriptive attributes, as age, physical handicap or (female) sex. It would be impossible to expect Japanese employment practices to eliminate the associated labour market distortion: on the contrary, as the Ministry of Labour has recognised, the contrary is the case, although, as noted by Shirai Kentaro, who as Director of the Employment Security Bureau (later administrative Vice-Minister) in his Recollections of the early 1960s (1987), the period when policies to promote employment of older workers first made their appearance, subsequent economic growth has considerably improved employment opportunities for such workers. But the labour supply/demand imbalance "cannot be considered easy to solve, in view of the country's tradition of lifetime employment and ill adaptedness to finding employment opportunities for older workers". Moreover, "At that time and subsequently there was particular awareness of the role played in Japan by 'the linkage between lifetime employment and the seniority-based wage system' and of 'the strictness with which the retiring age system was enforced, compelling retirement at a relatively early age' (Shirai 1987:52-3). More explicitly, "The obstacles to promoting employment prospects for older workers are not only the difficulty such workers have, compared with younger ones, in adapting to new types of work, but also the fact that in Japan the seniority-based wage system forms the basis for the practice of concentrating on the recruitment of new school-leavers. Thus even in the case of types of work where emotional maturity, and extensive professional and personal experience, are of particular importance, older workers tend to be squeezed out of employment opportunities by younger ones because of these traditional practices; and as a result older workers seeking re-employment are faced with serious problems" (Shirai 1987:123).

Thus Shirai argues that the reason why job opportunities for older workers did not increase greatly despite the country's striking economic growth is that, in addition to the problems caused by these workers' lower levels of ability to learn new skills, the traditional employment practices also created obstacles to their employment: in particular, the practice of concentrating on the recruitment of new school-leavers (a practice linked to the seniority-based wage system), and the "excessively low" fixed retiring age system. This classical interpretation, which can be traced back to the 1960s, has continued to form the cornerstone of subsequent labour market policy. Policy measures based on it include: (1) the Employment Adjustment Payment System, mentioned above; (2) the Older Workers Employment Promotion Special Measures Law (the so-called Old Workers Law, 1971), which prescribed a normative rate of employment of older workers, in each category of work, which firms had a duty to try to attain, and which was the first comprehensive piece of legislation dealing with promoting employment for older workers; (3) the Plan for Promoting Retirement Age Extension to 60, which derived from the Second Employment Policy Basic Plan (1973-76); (4) the extension of the Retirement Extension Promotion Payments system to apply to large firms (1976); (5) the revision of the Older Workers Law, and the prescription of an employment rate of 6 per cent for older workers⁽¹⁷⁾ , in the light of the severe conditions brought about by the oil crisis (1976) (since abolished); (6) the revised Continued Employment Promotion Payment System, aimed at encouraging re-employment or extension of employment after retirement, on the basis of a retiring age of 60 or over. The basic policy on promoting employment for older workers, based on the classical interpretation of the problem set out above, is still in operation; the Older Workers Law was amended by the Older Workers Employment Security Law (1986).

As the case of employment promotion policy for older workers illustrates, there are times when the Japanese labour market policy model and Japan's customary employment practices are in conflict. One might say that the policy model aims at "correction" of the employment practices. In the case of older workers this is done by increasing employment opportunities for older workers in the internal labour markets of large firms (job creation) through retiring age extension and other measures, and to that end aiming at the correction of problems arising from a high seniority wage by dealing with job evaluation wages and duty pay. This can be encapsulated as an attempt to guarantee long-term security employment by making the necessary corrections to the wage system. This approach is clear in the Third Employment Policy Basic Plan (1976-79).

Equality of employment opportunity and the Child-care Leave Law

Recognition of the subtle structural antithesis between the Japanese employment policy model and traditional employment practices, and the effort to "rectify" the effects of these practices, was not confined to the employment of older and physically handicapped workers⁽¹⁸⁾ but extended also to the employment of women, leading to the Equal Employment Opportunity Law (1986). This aimed at expanding employment opportunities for women, to give them the same chances of getting full-time employment as men, and to that end had two main components: regulations concerning basic standards, which firms were required to respect, prohibiting some practices and imposing certain obligations on firms to exert themselves to comply, and measures to provide support to facilitate the employment of women.

Part of the background to this legislation lay in the International Women's Year (1975) and the Japanese government's accession (1980) to the treaty adopted by the United Nations to abolish discrimination against women (Endo 1985:79-86), but it also reflected Japanese realities. Japanese employment practices regarded regular male employees as full members of the firm as a community, but even if women were full-time employees they would tend to leave employment on marriage or when pregnant (and thus there were not many regular female employees with records of long-term employment to retiring age), and therefore tended not to be accepted as full members of the firm (cf. Inagami 1988). This does not in itself permit one to say that Japanese employment practices were sexually discriminatory, but the Equal Employment Opportunity Law did involve a direct intervention into firms' internal labour markets and a significant modification of personnel management practice. The standards enjoined on firms comprised a proscription of discrimination on grounds of sex in relation to training, welfare, retirement and dismissal, and an obligation to strive for equality in relation to recruitment, hiring, job allocation and promotion.⁽¹⁹⁾ Local authority Women and Minors Offices were provided with publicity, advice, and guidance to publicise the measure. They were also required to offer mediation services. In addition, the Ministry of Labour produced a detailed explanatory manual. The provisions of the Equal Employment Opportunity Law were amplified by the Child and Family Care Leave Law (1991), which provided assistance to employers specifically directed at facilitating continuing employment or re-employment for workers with child or other family care obligations (in reality overwhelmingly women).

Whether one considers the Older Workers Employment Security Law, the Equal Employment Opportunity Law, or the Handicapped Workers Employment Promotion Law (1987), the underlying logic is the same, namely to rectify problems engendered by Japanese employment practices, and to relieve structural imbalances in labour supply and demand with a view to achieving full employment.

An atypical case of labour expansion: The Dispatched Labour Law and the Part-time Work Law

In reference to Japanese employment practices, legislation governing another and atypical form of labour deserves attention. In the "Japan Report" for the OECD Job Study (1993), it is observed that this atypical kind of labour "serves a buffer to protect the regular labour force from the impact of fluctuations in the economy", and that "the security of employment of these workers is a problem which needs to be considered" (Wakabayashi 1995:167).

It is a matter for discussion to what extent dispatched labour (i.e. a worker with a contract with the employer working under the instruction of another) is atypical (particularly in the case of the companies specialising in labour dispatch). The Dispatched Labour Law, which was passed in 1985, reflected the growth in this kind of labour arising from such trends as mechanisation, increased use of information technology, growth of the service sector of the economy, as well as from the diversity of employment preferences of women and many older workers. Industry's requirements for dispatched labour had also grown, notably in information processing and office work (Endo 1985:135-142). However, this law by no means wholly abandoned the prohibition in principle of labour supply businesses embodied in Clause 44 of the Employment Security Law: "With a view to keeping in harmony with Japanese employment practices, a limitation is imposed on the kinds of work in which labour dispatch is permitted; this is intended to prevent such workers being employed in place of regular employees" (Endo 1985:197). This is not just a matter of barring dispatched workers from such areas as dock-working and construction: just 17 kinds of work are specified in which labour dispatch is permitted. In addition there is a detailed system of regulation, requiring permits and registration for the general labour dispatch businesses, encompassing the firms from which and to which dispatch is made.

However, support for the principle of limiting dispatched labour to a few specified types of work (the so-called "positive list") has become much weaker of late and it may well be that the system will be replaced by one in which, with a certain number of exceptions all types of work are in principle "de-restricted". If so, it will mean that in the rush to de-regulate, there will have been a substantial abandonment of the earlier policy commitment to discourage labour dispatch in order to protect Japanese employment practices (by preventing substitution of dispatched workers for regular employees).

It is necessary to say a few words about the Part-time Work Law, which deals with a classic kind of atypical labour. From the mid-1970s onwards the number of part-time workers steadily increased (by 1996 it was over a million, and part-time workers accounted for about 20 per cent of the total number of those employed). This has led to a number of problems, such as lack of clarity about proposed conditions of work, unsuitable employment management, "pseudo-part-time" workers whose working time is much the same as that of regular employees, and problems involving the tax system. Policy, however, did not succeed in keeping up with these developments. One reason is that, as mentioned above, part-time labour serves as a buffer protecting existing employment practices. In almost all enterprise trade unions the part-time workers are not eligible for union membership, and the unions are liable to lack zeal in pressing for improvements in their working conditions.

In 1984 a set of Part-time Labour Policy Guidelines was published, with the aim of promoting enlightened employment practices, but it was not until 1993 that the Part-time Work Law was passed. This prescribed the provision of conditions of employment in writing, set up a regulatory system for part-time workers, and established a Short-time Work Assistance Centres as a resource for part-time workers and their employers to improve employment management. A Ministry of Labour research group has recently reported that both in reality and in public awareness there has been a trend to much greater diversity in the management and employment of part-time workers; the group points out the need to give greater attention to such workers' needs, and to accord them treatment more in line with that given to regular employees in such areas as career development, education and training, severance pay and pensions (cf., Part-time Work Research Group 1997).

Policy on foreign workers: Amendment of the Immigration Control Law

Since the early 1990s there has been much interest in the Republic of Korea, Singapore, Taiwan, Malaysia, and elsewhere, in the adoption of policies on the numerous foreign workers who have come to those countries as a consequence of labour shortage. In Japan in the second half of the 1980s, during the bubble economy, there was similar strong interest in this subject.

Japanese policy focuses on immigration control at the point of entry (an approach called "threshold" or "water's edge" policy), and does not concern itself with the system of employment law as such, but immigration control has an important impact on the nature of the foreign worker question. The reason that this question became the object of major social concern lies in the fact that, against a background of labour shortages in industries with a negative image (known as "3K" from the Japanese words for dirty, depressing and difficult), the bubble economy in the latter 1980s further aggravated this labour shortage. In particular, there were demands, centring on (groups of) employers in small and medium enterprises, concerning the recognition of (individual) foreign workers' employment. There was also a rapid increase in the number of illegal foreign workers, and associated social problems arising from the underground activities of "brokers" who placed them. This led to calls, from a human rights perspective, for "legalisation".

The amendment of the Immigration Control Law (1990) had four important components. First, simple or unskilled foreign workers continued to be prohibited from taking employment. To prevent infractions of this a system of penalties for employers was instituted. Second, the entry quota for specialist workers was greatly expanded, and the number of qualifications for residence increased from 18 to 28. Third, in order to promote technology transfer to the countries from which workers came, a new system of foreign trainees was established (and from 1993 an additional system of practical training was created, permitting a much longer period of stay). Fourth, foreigner of Japanese ethnic origin were granted right of residence irrespective of their activity while in Japan. Although such foreigners, if two or three generations removed from their Japanese origins, often did not understand Japanese, they were given the right of free activity while in Japan, including taking employment as individuals. This was a major contradiction of the general principle whereby this right was denied to foreigners (cf. Inagami 1992).

After this revision of the law, various moves were made to promote placement of foreign workers in legal employment, such as Foreign Worker Employment Service Centres and Foreign-born Ethnic Japanese Employment Service Centres. Mandatory guidelines for employers of foreign workers, dealing with employment and conditions of work, were also promulgated (1993), and in the same year a system of reporting on the employment of foreigners was established. On the basis of reports by employers, guidance and assistance could be offered to improve the management of foreign workers' employment and steps taken to prevent unemployment and promote re-employment (Wakabayashi 1995:309-315; Takanashi 1995:761-772).

Is the Japanese model changing? A re-consideration of the relation with employment practices

As stated earlier, the fundamental objective of the Japanese labour market policy model is full employment. With this objective in mind it lays stress on the performance of the free market (and consequently depends heavily, in matters of job security and training, on firms and on the operation of the market), and seeks to correct structural imbalances in labour supply and demand. The Japanese model may be said to be made up of the following components: implementation based on a continuous history of Employment Measures Basic Plans; co-ordination of labour market policy with economic and industrial policies (i.e. allowing some revision of the two latter in the light of the labour market situation); independent funding derived from employment insurance for support and subsidies offered to employers; specific programmes for employment insurance, job placement, skill development and job creation; and a neo-corporatist decision-making process. Despite the recent prominence given to de-regulation and administrative reform, the model has not fundamentally changed.

However, while recognising this character, one must also recognise the relationship it has in concrete terms with Japanese employment practices in regard to "correction of structural imbalances in labour supply and demand". In the pursuit of the goal of full employment these practices play a supportive role by fostering long-term stable employment. The employment adjustment payment system is aimed at "unemployment control". However Japanese employment practices are "unkind" in their impact on older workers, the physically handicapped, women and those who are not regular employees. Indeed, these practices tend to exclude such workers. This structural exclusiveness is encompassed by the expression "structural imbalances". Accordingly, although the model admits the existence and functioning of the employment practices, in pursuit of full employment it also needs to rectify the structural imbalances which those practices create.

It must be said that the Ministry of Labour's thinking on the extent to which Japanese employment practices should be taken as a "policy assumption" may be in the process of change, as a result of such developments as the growth of public concern with de-regulation, arguments concerning the "collapse" of Japanese employment practices, and proposals for reform of the model (e.g. by the employers' organisation Nikkeiren in 1995). For example, as implied above, a drastic revision of the Dispatched Labour Law (including "de-restriction" in principle of the limit on kinds of work involved) could reduce the opportunities for long-term secure employment and thus fatally damage the existing pattern of employment practice. Another instance is the possibility, currently being considered by the Central Council on Labour Standards in relation to amendment of the Labour Standards Law, of three-year contracts for R&D workers (at present the law requires either contracts for less than one year or indefinite employment). Another move likely to increase labour mobility is the expansion of the Business Career system for white-collar workers established in 1993 (involving enhanced opportunities for private-sector educational and training opportunities for such workers and certification of job qualifications), together with the probable liberalisation of private, fee-paying job placement services.

Consequently, the new trends in labour market policy may not fit well with the image of the Japanese model as one which treats existing employment practices as a necessary premise in aiming for full employment. There may instead be a change (spontaneous or enforced) to a basic approach which accepts partial dissolution of existing practices as tolerable if full employment can be attained - or indeed which regards increased mobility as necessary in order to preserve full employment.

Thus the Japanese model itself has not fundamentally changed, but its relationship with Japanese employment practices is undergoing a subtle change. This reflects a number of recent changes in the policy environment, such as the long-term 1990s recession following the bursting of the bubble economy, very high values of the yen and industrial "hollowing-out", intensified international competition and the acceptance of global standards, the importance of information technology and technological innovation, the excessive payroll costs of older white-collar workers, and the increased desire for employment among highly educated women.

2. Singapore's labour market policies

Singapore is a small city-state which, unlike Malaysia, does not possess natural resources of its own, but in the words of Prime Minister Go Chok Tong, "Singapore's greatest resource is its human resources"⁽²⁰⁾ . The notion of economic development based on human resources, in a country without natural resources, is one which broadly applies not only to Singapore, but also to other Asian NIEs (the Republic of Korea, Taiwan, Hong Kong, China).

We shall here consider what sorts of developments were involved in formulating Singapore's labour market policies, what problems they confront, and how they seek to deal with those problems.

2.1 Major epochs

Economic growth, labour market problems and human resource development

Singapore is currently considered to have one of the most internationally competitive economies in the world according to the 1996 World Competitiveness Report. In 1960, however, it was still a developing country, with an unemployment rate as high as 14 per cent. In the early 1960s Singapore adopted a development strategy of labour-intensive export-oriented industrialisation (EOI), and for this purpose set up the Economic Development Board (EDB). Promotion of foreign investment, development of infrastructure, and finance for industrialisation were all given high priority; the government also had a strong consciousness of the importance of human resource development (Tan 1997), and set about educational reform, increasing the scientific, technological and business orientation of the schools' curriculum, and enhancing intermediate-level technical education.

During the 1970s Singapore achieved the remarkable annual economic growth rate of 8-9 per cent. This was due to the development of modern industries, largely dependent on multi-national enterprises, and the rise of the service sector. These changes were accompanied by a steady fall in the unemployment rate from 6 per cent in 1970 to 3.3 per cent in 1979. The basic problem of labour market policy had already ceased to be unemployment. In 1972 full employment was achieved. From this time the main fight became one against labour shortage. A major concern was raising productivity so that demand for labour did not grow. The Singapore government established a National Productivity Board to further this purpose in 1972. It was particularly concerned with fostering vocational training and good industrial relations. In addition, in the first half of the 1970s a number of training centres were established, with the assistance of foreign capital, in areas such as tool and metal machining and precision and electro machining.⁽²¹⁾ Also, continuing into the 1980s, with Japanese, French and German assistance further training facilities (German-Singapore Institute, French-Singapore Institute, Japan-Singapore Institute of Software Technology) were set up under EDB auspices, providing for the training of technical specialists for high value-added industries (Harada 1983: 77-80).

In 1979, with the expression "second industrial revolution" the government declared its intention to move the economy towards a technology-intensive, high value-added orientation. The economic growth rate during the 1980s averaged 7 per cent⁽²²⁾ , despite a recession in 1985. Inward foreign direct investment continued to flow steadily. The new orientation to a high value-added economy led to the recognition of human resource development (HRD) as an important policy issue, since it was seen that the basis of such an economy must lie in the development of human resources. The government set up a Skills Development Fund (SDF) in 1979, based on the Skills Development Levy Act (SDLA) passed in the same year. This constituted a system whereby a set amount of money was collected from the employers of relatively low-paid workers and used to subsidise those employees' education and training.⁽²³⁾ Also in 1979, the Committee on Professional and Technical Education (CPTE) was established as a deliberative and planning body for specialist, technical and skilled labour, and a Vocational and Industrial Training Board (VITB) was set up, with responsibility for skill development for workers who had completed secondary education. The fact that all these new measures and organisations were introduced all together, in 1979, shows how seriously the question of human resource development was taken as a requirement in pursuit of the new policy objective of structural reform of the economy. Multinational firms were also mobilised for this purpose, as illustrated by examples such as the IBM Information Technology Programme for Office Workers, Philips Industrial Engineering Programme, and the FESTO Industrial Automation Programme for Workers (Tan 1997:3-6).

Thus we can see that, in the small city-state of Singapore, the basic character of labour market policy problems had changed by the early 1970s. This was one of the consequences of the export-oriented industrialisation which took place after independence. The problem of unemployment largely receded, and in its place labour shortages began to make themselves felt. In particular, in 1979, with the identification of a technology-intensive and knowledge-intensive industrial structure and high value-added orientation as national objectives, policy thinking focussed on the importance of ensuring suitable human resources. In that sense labour market policies came to have a high degree of importance for Singapore. It is undoubtedly true that, for natural resource-poor "East Asian countries with export-oriented industrialisation, the effective use of human resources is of central importance" (Deyo 1992:304).

A second observation we may make is the importance of the SDLA in the policy programme. As explained above, this constituted a system whereby a set amount of money was collected from the employers of relatively low-paid workers and used to subsidise those employees' education and training. In its content it more closely resembles the Republic of Korea's Basic Vocational Training Act of 1976 than the Skill Development Programme of the Japanese Employment Policy Law of 1964.

Thirdly, and in this respect quite unlike the Republic of Korea, the active encouragement of foreign investment and the role played by multinational firms had a very strong significance for Singapore's economic development and human resource development.

Fourthly, the idea that Singapore, having few natural resources, should develop its economy through human resource development, is of long standing.

Trade Unions and Industrial Relations: From suppression to inclusion

A point which should be taken up here is one which is often referred to in discussions of the East Asian economic "miracle", namely repressive treatment of labour by the state or "suppression of labour", and the ways in which the its nature has changed over time (cf. Deyo 1989; Henderson and Applebaum 1992; Verma et al. 1995; Lansbury 1996).

During the initial phase of industrialisation, up to the 1960s, the Singaporean government's attitude was "repressive" towards labour. In 1960 the People's Action Party (PAP), which had taken power in 1959, introduced a system of compulsory arbitration by a revised Industrial Relations Ordinance, which exemplified the new government's interventionist approach. In the same year a revised Trade Unions Ordinance, which regulated disruptive behaviour with "unlawful" objectives by unions, tightened the system of union registration. Between 1959 and 1966 14 unions were refused registration, and 138 unions were de-registered (Tan and Chew 1996:143; Leggett 1996:75f.). A further amendment to the Trade Unions Ordinance in 1966 tightened still more the definition of an industrial dispute by requiring the support of at least two-thirds of union members in a secret ballot for a dispute to be legal. Essentially the government's basic objectives were to promote a collective bargaining system from which truculent leftists and dissatisfied factions were excluded from the leadership of the union movement, and to foster a more co-operative unionism (Deyo 1989:123f.).

However, by the late 1960s a new trend emerged which diverged slightly from the repressive industrial relations policies followed by the government in its early stages. This development was represented by two major new laws in 1968, the Employment Act and the Industrial Relations Act, by the policy shift towards "New Unionism" by the National Trade Union Congress (NTUC) in 1969, and by the establishment, through the setting-up of the National Wage Council (NWC) in 1972 of a system of tripartism or national corporatism.⁽²⁴⁾ The government sought the support of the NTUC as "a measure in aid of economic development policy", conceding union fee check-off and a variety of other benefits to union members, under NTUC direction. During the 1970s union membership doubled.

In 1995, 73 of the existing 81 trade unions were NTUC members. The remainder, comprising small craft or enterprise unions, accounted for only 1.5 per cent of total union membership (SMOL 1996:13).

2.2 Current labour market policies

The National Wages Council

As mentioned above, the NWC was set up in 1972. It is chaired by a leading economist (currently Prof Lim Chong Yah of Nanyang Technical University) and its members comprise five representatives each from government, employers and unions. On the employers' side, in addition to the President of the Singapore National Employers' Federation (SNEF) and the head of the Singapore Chamber of Commerce, there is representation of the multinational companies (Japanese, German, and American) which have played an important part in Singapore's economic development. Union representatives are drawn from the membership of the central executive committee of the NTUC and the General Secretaries of the major industrial unions. The government side included the Permanent Secretaries of the Prime Minister's Office, of the Ministries of Trade and Industry and of Labour, and of Economic Development Agency (SMOL http://www.gov.sg/mol/Apr 15 1997). The senior leadership of all three sides is thus represented.

The NWC has three main tasks. First, it lays down annual guidelines on wage increases. Second, it makes recommendations on pay structure and management in the light of policies for long-term development. Third, it makes recommendations aimed at the enhancement of operational efficiency and productivity. The guidelines on wage rises are not legally binding, but in practice they carry substantial weight (Tan and Chew 1996:145f.). In this respect they have more impact than the comparable wage restraint policies in the Republic of Korea.

The 1997 NWC Guidelines, announced on 31 May 1997 and operative from 1 July 1997 to 30 June 1998, give consideration to the previous year's record on productivity and international competitiveness, labour markets and wage rises, and economic performance, and to economic prospects for 1997. Among the major points made by the guidelines on (a) wage increases and (b) reform of the system of pay determination were: (1) the need to keep wage rises under control in the light of intensifying international competition and the prospect of slower growth rates; (2) the need for efforts by labour and management to raise productivity in order to assure rising wages over the long term; (3) on the principle of wage rises, "Wage rises must reflect economic performance. Rises in basic pay should be lower than the rate at which productivity rises. Other variations in pay should reflect the management circumstances in different enterprises"; (4) the importance, since 1986, of "flexible pay systems", in which so far as possible wage rises are based on a bonus or similarly variable system; (5) bonuses to outstandingly capable employees in recognition of their contribution; (6) a higher rate of wage rises for low-paid employees, to narrow the wages gap; (7) the change from seniority-based to ability-related pay determination; (8) a welcome for the Base-up Wage System⁽²⁵⁾ proposed by the NTUC in place of seniority wages, and a call for labour and management to strive for its implementation.

In addition, there are recommendations on (c) investment by firms in employee skill development. First, for an expansion of the Skills Redevelopment Programme (SRP) proposed by the NTUC with the support of the EDB, PSB and ITE, with a particular focus on re-training of older workers. Second, for an expansion of the SNEF's initiative on employee training by small and medium enterprises which tend to lag behind large firms in employee education and training.

Also, in the light of the prospect that Singapore will be increasingly faced by problems of labour shortage and a rapidly ageing workforce⁽²⁶⁾ , (d) a need is identified for the efficient use of the potential labour force. One measure urged is an increase in the age of retirement, so that older workers can continue working for as long as possible. Another is to increase the rate of employment (including part-time employment) of women.⁽²⁷⁾ Both these measures should not only tend to relieve the expected labour shortage problem, but also contribute to reducing the country's dependence on foreign workers, and to that end the NWC recommends an expansion of the Back to Work Programme proposed by the Ministry of Labour together with the PSB, NTUC and SNEF. It also supports (E) the introduction of a revised system of Co-payment of Medical Expenses.

Finally, the Guidelines state as follows:

"Singapore must continue to promote a harmonious industrial relations climate through close tripartite co-operation between the government, employers and trade unions. Close labour management cooperation is an important contributing factor to our economic development and social progress. The three social partners should therefore continue to work closely together to preserve industrial harmony so that Singapole can remain an attractive place for investments. This will enable Singapore to enjoy continued economic growth and further improve the well-being of all Singaporeans" -- from The 1997 NWC Recommendations.

These recommendations, for (1) moderation in wage rises, (2) promotion of a flexible and ability-based wage system, (3) activation in the labour force of older workers and women workers in order to head off labour shortage problems, and (4) enhancement of training in smaller enterprises, all serve to further the goals of maintaining and improving international competitiveness and encouraging inward direct investment from abroad. The NWC, incorporating government, labour and management bodies in a tripartite system, in prescribing and promoting these policy objectives, can thus be seen to have an extremely important role. This system, involving the participation of representatives of multinational companies on the employers' side, symbolise a kind of corporatism in the small Singaporean city-state.

Policies towards foreign workers

The problem of labour shortage, leading in turn to pressure for wage rises, goes back some way in Singapore. This led to the need for the introduction and further development of incomes policies, centred on the NWC. In this context we may note that, with an average unemployment rate of 2.0 per cent between 1988 and 1996, Singapore enjoyed extremely full employment during this period (SMOL 1997:161). Policies to relieve or solve the problem of labour shortage, which has come to assume major importance, include the effective use of the potential labour force through policies directed at older and women workers, and also the limited introduction of foreign workers.

The basic approach of the Singapore government is to relieve the chronic domestic labour shortage by allowing the shortfall, to the extent necessary, to be made up for by the introduction of foreign workers, while preventing a large influx of unskilled labour. The Employment of Foreign Workers Act, passed in 1990, provides for upper limits, for each industry, on the numbers of foreign workers (Dependency Ceiling), and a levy (the Foreign Worker Levy) on firms which employ foreign workers. Table 1 shows the dependency ceilings for different industries.

Table 1: Dependency regulation of foreign workers and levy rate in Singapore

As it shows, the limit for the manufacturing sector is 50 per cent, and the corresponding levy per worker is 330 Singapore dollars per month (if the dependency rate is below 40 per cent) and S$ 400 if the dependency rate is between 40 and 50 per cent. In the service sector the dependency ceiling is kept lower, restraining the level of the foreign workforce, whereas for industries and occupational categories such as construction, marine and harbour workers, and maids the permitted dependency rate is higher. In effect the latter sectors would have difficulty coping without dependence on foreign labour.

As a general trend, during the 1990s the rate of dependence on foreign workers has gradually risen, and the labour market has come to depend all the more on the foreign workforce. At the start of 1996 the number of foreign workers was 350,000 (19.4 per cent of the workforce in 1996), and by October 1997 it had reached 450,000 (25 per cent of the workforce). This is quite a high dependency rate by comparison with Japan, the Republic of Korea, Taiwan and China. It is attributable to employment in the construction industry and of foreign domestic workers (http://www.gov.sg/mol/Nov 4 1997). In these forms of employment the foreign worker levy was due to be raised in April 1998 (See Table 1).

Extension of retirement age

In response to the problem of labour shortage there are also measures, in addition to the introduction of foreign workers, to make more use in the labour force of older and women workers.

For older workers there are measures to extend the retiring age and to bring back into the workforce those who have left employment. In April 1993 a system providing for "Retirement Age (Exemption) Notification" (RAEN) was introduced under the Retirement Age Act, and in September 1996, the Back to Work Programme was announced, aimed at bringing workers back into employment.

Under Section 4 of the Retirement Age Act "Employers may not dismiss an employee on grounds of age if the latter has not reached the age of 60 or other specified retiring age", and appropriate penal regulations apply in the case of violation of this rule. On the other hand, the RAEN exempts certain categories of occupation or employer from the general rule. Until very recently the retiring age in many enterprises in Singapore was 55. However in the 1990s, as a result of efforts by the unions, the retiring age in many enterprises with unions has begun to be extended to 60. Nonetheless, since this extension is not generally occurring in enterprises where there is no union, the overall proportion of enterprises with 200 or more employees in which the retiring age is 60 is no more than 20 per cent. The smaller the scale of the firm, the lower the rate. It was expected that, before the end of the three-year plan established in 1991 for extending the retiring age to 60, the government would implement legislative measures which would apply to such firms without trade unions which did not implement such extensions of their own accord (Business Times, Nov 23-4 1991). In fact, the extension was not adopted as widely as expected by the government and unions. The Retirement Age Act mentioned above was the consequence of this.

However, the trend to extend retiring age did not come to a halt. In July 1997 the Minister of Labour, Dr Lee Boon Yang informed Parliament that the current retirement age of 60 would, with effect from January 1999, be raised to 62. At the same time, it was announced that in order to lighten the burden on employers of workers over 60, the rate of employers' contributions to the Central Provident Fund (CPF) would be reduced. This proposal had been embodied in the report to the government of a committee of government, unions and employers' representatives in November 1995 (Straits Times, July 26 1997). If this revision of the law is made, the official retiring age in Singapore will, in the space of just over ten years, have been raised from 55 to 62.

The back to work programme

Efforts to make more effective use of the domestic labour force are not confined to older workers, but extend also to women. In particular there is strong emphasis on part-time working and on flexible work. The Back to Work Programme announced in September 1993, based on a tripartite initiative of government, unions and employers, is directed at the re-incorporation into the labour force of full-time housewives and retired older workers. After a six-month pilot programme, in April 1997 the weight given to these categories increased. The programme provides for education and training for re-employment. On agreement of a contract of employment, the costs of 35 hours of Core Skills Training provided by the Singapore Productivity and Standards Board or through in-firm training are met by the Skills Development Fund (S$ 350 per trainee, of which S$ 100 constitutes the trainee's allowance) (http://www.gov.sg/mol/3 September 1997).

Related to this development, in September 1996 the Singapore government established a set of detailed rules governing conditions of employment, the Employment (Part-time Employees) Regulations, defining part time work contracts of up to 30 hours per week and making provisions for contracts of employment, holiday working allowances, overtime payments, paid leave, sickness, and maternity allowances.

Increasing value added and development of human resources

There is also a qualitative aspect to the shortage of human resources. This is particularly important for strategies to increase the amount of value added in the economy.

This problem was already a factor when in 1979 the SDLA was passed and the SDF established. As mentioned above, technical training has been promoted with the co-operation of Japanese, French, German and other multi-national firms, and the NWC in its annual guidelines has urged expansion of employee skill development. For example, the 1992 NWC guidelines called for firms to make investments in line with "a national target⁽²⁸⁾ of 4 per cent of annual wages to be allocated to employee skill development". According to Heng (1992), "annual spending per employee on training" by firms "in Singapore is only one-tenth of Japan's and one-third of America's". The rationale for such a national target can be understood in the light of firms' claims that there is relatively little incentive for them to initiate employee training.

Since firms invest insufficiently human resources, education in the school system and other public training providers is being enhanced. Singapore has only two national universities, the National University of Singapore formed by amalgamation of the University of Singapore and Nanyang University in 1980 and Nanyang Technological University founded in 1991, though derived from the former Nanyang Technological Institute, founded in 1981. However both of them, particularly NTU, have a strong business orientation. Of the 6,257 graduates of NUS in 1996, 1,784 were in science, 736 in engineering; and of NTU's 3,402 graduates in that year, 1,160 were in engineering, 241 in computer engineering, and 63 in materials engineering (cf. 1996 Singapore Yearbook of Labour Statistics: 111-3, 125-6).

In addition to these two universities, Singapore has four polytechnics with an important role in professional training: Singapore Polytechnic, Ngee Ann Polytechnic, Temasek Polytechnic, and Nanyang Polytechnic. These are institutes of advanced education at a slightly lower level than the universities which provide training for mid-level technical and executive personnel. The numbers graduating from them in 1996 were: for SP 5,164 (of whom 1,997 in engineering), for NAP 3,855 (of whom 1,997 in engineering), for TP 1,214, and for NP 2,117, a total of 12,350. According to Takashi Kitagawa of Ishikawa Skill Development College, who worked at NP (founded in 1992) from 1994-96, the graduates in the four faculties of Engineering, Business Management, Health Science and Information Technology received diplomas in a total of 17 courses. Generally speaking, education in Singapore's polytechnics has a strongly pragmatic character, clearly aimed at fostering national prosperity and oriented towards advanced technology and the development of creativity, and closely linked to in-company training practice. Compared with Japan, practical subjects are emphasised, and there is close co-operation with businesses. For example, at NP product development is carried out on behalf of firms. In addition, as part of the third-year student projects eight weeks' practical training in a firm is required (Kitagawa 1996: 25-30).

There are in addition to the polytechnics, numerous public (e.g. the Occupational Health Centre, Construction Industry Development Board, Singapore Productivity and Standards Board, Institute of System Science) or non-profit making (Singapore Institute of Management, Singapore Institute of Human Resource Management) specialised training institutions.⁽²⁹⁾ Of these, the SPSB is under the authority of the SDF. In 1995-96 the SDF provided funds to a total of 9,883 companies and 461,651 places of employment, to the total value of S$ 62.2 million.

There is also a number of Institutes of Technical Education for blue-collar workers who have completed secondary education but not proceeded to university or a polytechnic. There are currently 10 of these institutes in different districts, comprising re-organised and expanded versions of the VITB. "As a post-secondary institution, the ITEs' primary aim is to establish a pool of skilled manpower to support Singapore's economic development" (1996 Yearbook, p.117). In 1996 5,881 secondary school graduates completed ITE full-time courses or apprenticeship courses, and a further 17,132 trainees who were already in employment completed part-time skill development programmes, and 29,182 more already employed trainees completed courses in continuing education (1996 Singapore Yearbook of Labour Statistics: 121, 133-5). It may be noted in passing that there is a tripartite government-union-management consultative committee concerned with the management of the ITEs. Here again one may discern a kind of corporatism at work.

In addition, a new Adult Co-operative Training Scheme was introduced in January 1993. This is aimed at training semi-skilled and unskilled workers between 20 and 40 in the metal-working, mechanical, electrical and electronic industries to qualify for level 3 of the National Technical Certificate (NTC-3). Under this programme, trainees take part in an Apprenticeship Course involving practical training at the workplace, the full cost being at the employer's expense. However, on the attainment of NTC-3 by a trainee, a subsidy of up to S$ 1,000 is payable by the SDF (Straits Times, November 7 1992).

It may thus be seen that in Singapore human resource formation is seen as an important policy concern. It is dealt with less by "Japanese-style" methods of voluntary in-company OJT than by public providers such as the two universities, four polytechnics, ten ITEs and other public or non-profit-making training organisations which cover technical skill training from high-tech human resources to low-skilled technical workers; and that a central role is played by the attainment of educational qualifications and national skill certification.

Job placement and unemployment insurance

A brief word may be said in conclusion about job placement. The Work Permit Department of the Ministry of Labour regulates the activity of employment agencies under the Employment Agencies Act which entered into force in 1959. In 1995 there were 795 employment agencies, of which 181 had been established in the course of that year and 614 had continued in operation from the previous year. In the same year 68 agencies closed and 2 had their permits revoked for contravention of regulations. In addition 63 agencies received warnings on grounds of inappropriate activities.

Apart from the private agencies, Singapore possesses public employment offices which offer advice and job placement assistance to unemployed workers or workers laid off in the course of company re-structuring (retrenched workers). In 1995 job placement assistance was provided for 4,532 applicants of whom 532 found work (SMOL 1995: 49-50).

At present there is still no system of unemployment insurance in Singapore. Important factors in this are the facts that as already seen, Singapore enjoyed full employment from an early stage, and that the Central Provident Fund (CPF) has existed since 1955 as a general safety net.⁽³⁰⁾

Summary

• The nature of Singapore's labour market problems changed radically at the start of the 1970s. The former worry of unemployment receded, and concern turned to labour shortages. This was attributable to the success of export-oriented industrialisation (EOI). Full employment was achieved as early as 1972. From then on the basic problem has been one of qualitative and quantitative labour shortage. Moreover, since the late 1970s the national objective of aiming for high added value has given even greater importance to human resource quality. For a country whose main resources are human ones, the effective solution of these problems is a prime policy concern.



• Quantitative labour shortage leads to pressure for wage rises. For Singapore, which has followed a strategy of relying on foreign investment for industrialisation, this is a matter of serious importance. The government set out to restrain and control this pressure by removing hostile trade unions and encouragement and "enlistment" of co-operative ones, and by involving the latter unions in a kind of corporatism. From 1972 onwards the establishment of the NWC, incorporating leaders from government, unions and management, gave this approach strong authority.

The NWC makes annual recommendations to the government, not only regarding rates of wage increases in line with economic performance, but on labour market policies generally, including the promotion of a "flexible wage system", diverse skill development for employees, and adaptation to labour shortage by fostering the use in the workforce of older and women workers. These recommendations are not legally binding, but carry strong effective weight.

• Quantitative labour shortage problems have been addressed by limited introduction of foreign workers into the workforce, and by strategies to make use of older and women workers. The former approach involves a control based on the level of demand, by means of ceilings (by industry or job category) on the proportion of foreign workers allowed, and by the foreign worker levy, which prevent an unrestricted supply. Even so, dependence on foreign workers generally has reached the 25 per cent level.

With regard to older workers, the approach is one of extending the age of retirement. From 1999, if the retiring age is raised to 62, Singapore will have raised the retiring age from 55 to 62 within a space of ten years. With respect to women workers attention has been given to facilitating part-time work, and attempts to develop appropriate legislation have been gathering speed in recent years.

It is noteworthy that such policies to deal with quantitative labour shortage problems have been determined through a policy-making system of a national corporatist kind, centred on the NWC.

• The qualitative labour shortage problem is serious. Singapore's vocational education and training (VET) system includes two universities, four polytechnics, 10 ITEs, public and non-profit-making training bodies, and training organisations based on foreign investment in association with the EDB; in addition there is the SDF which involves a system of compulsory levies on businesses and subsidies. There are gaps in the provision of human resource development within companies, and the government and public training bodies therefore have an important role to play.

• Job placement services are provided not onl