Job-Type vs. Membership-Type Employment in Japan

Historically, the definition of employment in Japan has been a unique one.

While you may be accustomed to having a well-defined position with clear-cut duties, this wasn’t really the case in Japan for the longest time. Employment was permanent and even for life, and the duties of the employee were never clearly defined. 

In this system, employees would simply be assigned to whatever task needed to be done at the time, which would lead to all employees working at a company feeling a sense of responsibility toward all aspects of the company’s operational activities.

This system was so unique that it was even called “Japanese-style employment” by researchers all over the globe. Today, while it may not be as prominent, this system still is very much alive in Japan, and it’s more commonly called “membership-type employment.”

So, what does being a member of a company even mean? How did the concept of “job-type employment” come into play, and how is it any different than membership-type employment? These are some of the questions I’ll answer in today’s post, along with some frequently asked questions on the topic.

Let’s start with a little bit of background.

The Background of the Japanese Employment System

The roots of the current employment system in Japan actually date all the way back to the prewar period in Japan, around the 1920s. 

During this time, concerns regarding employment stability were growing among workers, and the labor force was beginning to show signs of annoyance regarding the way employment was handled at the time. This was an especially hot topic among shipyard workers who were on the cusp of rebelling.

At the time, socialist ideas among unsatisfied workers were also spreading like wildfire due to the social injustice at the time.

Not long after, in 1922, an admiral decided to provide the naval shipyard workers with job stability and paying the employees sufficient wages that would actually allow them to get by with a single job.

Not only did this idea come as a remedy to the spreading of socialist ideas, but it also would allow social stability.

In time, this idea became much more structured. As a natural extension, concepts such as “lifetime employment” became a defining component of this new system. In return, another concept, being loyal to the employer, also became synonymous with the idea.

Essentially, what the admiral was suggesting at the time was simple: if you promised lifelong employment, you’d get the employees’ loyalty and commitment to the employer in return, which would establish the idea that the employer’s and the employees’ interests were one and the same.

Post-War Period and the Rise of Lifetime Employment

After the idea of lifetime employment was established in naval shipyards, it continued to gain popularity in the following years. Especially during World War II, this new Japanese style of employment came to be fully embraced by the Japanese government. 

After World War II, as Japan was undergoing a reconstruction period, labor unions became even more prominent as they continued to rally for workers’ rights and job stability. Even during the American occupation in the post-war era, this system stood strong despite the ongoing efforts toward a new labor reform at the time.

During this period, labor unions even became company-specific and began to collaborate with the management of companies to ensure the rights and job stability of the employees. This was a necessity at the time, as the country was trying to rebuild its economy.

Japan’s Economic Growth in the ‘60s

As I discussed extensively in my post on the history of Japanese technology, the ‘60s in Japan marked the beginning of an era of economic growth and technological advancements. 

As Japan’s economy grew stronger, it was pretty much established that the idea of lifetime employment and loyalty to the company was a big success, as it not only helped Japan rebuild its economy but also enter a “golden age” as Japanese technology became a prominent force on a global scale.

However, things started to change in the ‘90s. Due to the economic bubble bursting, Japan began to lose its leading position in the world. The increased competition from other countries’ economies wasn’t helping either, and the world economy was rapidly changing.

While the Japanese style of lifelong employment got the country through some tough times, this just wasn’t as viable anymore, with labor practices changing and market dynamics shifting dramatically.

Naturally, opinions began to spread regarding how this old style of employment wasn’t serving Japan anymore in the modern world. Companies were struggling to adapt, and there was a greater emphasis on work efficiency, which led to the idea of lifetime employment — or membership-type employment, as it’s called today — becoming gradually less popular among the Japanese, which continues even today.

What Is Membership-Type Employment?

So, now that you have a good understanding of how this traditional style of employment came to be in Japan, let’s now take a look at what membership-type employment means today and what it entails for employees.

While membership-type employment is still thought to be the same as “lifetime employment,” this sentiment isn’t really accurate when considering the modern definition of the concept. While there are still people in Japan who manage to retire from the job they entered when they graduated from college, it has become more common for people to change companies throughout their careers, even among companies that still embrace membership-type employment.

Today, membership-type employment essentially means that the relationship between the employees and the company is more akin to that of “a family” rather than a professional relationship. 

The idea of having shared interests by both parties, however, remains pretty much the same, and the system is built upon the loyalty and dedication of the employees to the company they work for.

As we mentioned, according to the membership-type employment system, employees’ duties aren’t clearly defined but are designed to be adaptive to the company’s current needs. Basically, the employee’s duties are also known to cross departments or positions. Employees can even be assigned to other branches, and changing locations isn’t seen as a big deal among employees.

Usually, companies that work on a membership-type employment basis hire their employees right out of college to train them on the job. In this system, the candidates' experiences and qualifications don’t really matter as long as they show promise that they can eventually get the hang of the job.

The membership-type employment system as we know it today is built upon two concepts, which are the seniority wage system, or nenko-jyoretsu, and lifetime employment, which is called shushin koyo.

Let’s now take a closer look at these concepts to understand membership-type employment better.

Seniority Wage System (Nenko Jyoretsu)

As you may guess from the name, the seniority wage system, or Nenko Jyoretsu, is based on an employee’s seniority level at a company. However, seniority level is not just related to titles but to how long an employee has worked for a company.

According to this system, those who work at a company for the longest time usually have more of a say in how things are done. In fact, even if there are multiple people with the same level of seniority title-wise, the person who has been working for the longest time has more of a say than the others. 

While it may seem like a natural consequence of the membership-type employment system, the seniority wage system is, in fact, an integral pillar of the system. As people who start working at a company get to a seniority level that they’re comfortable with, it motivates them to stay at the same job indefinitely; changing jobs would simply “reset” their career progress by years.

Of course, the other main reason why seniority means so much in a workplace is that in cases where employment type is membership-based, people who are employed for the longest time are usually the ones who are the oldest in age as well.

This is mainly because age is much more than just a number in Japan, and simply being younger or older in a social setting has certain social implications. In fact, this unwritten rule even dictates the way you interact with others, as I explained in posts such as how to say “how are you” in Japanese and how to say “thank you” in Japanese.

However, another reason why this is the case is that lifetime employment and job-type membership often go hand-in-hand in Japan.

Lifetime Employment (Shushin Koyo)

While it may not be as prominent as it once was, the concept of lifetime employment, or Shushin Koyo, has historically been a crucial part of the membership-type employment system in Japan.

As I mentioned, companies that adopt a membership-type employment system in Japan hire their employees right out of college. This is called simultaneous recruiting of new graduates, or shinsotsu-ikkatsu-saiyo, and I covered this in my post on job hunting in Japan. 

So, because people get hired during their senior year and start working right away, they usually don’t have enough experience and lack practical knowledge regarding a specific job. 

The system remedies this, of course, by training them once they’re hired, and the actual qualifications of a candidate don’t matter as much — as long as they seem capable of learning the ropes.

Normally, a person who’s hired at graduation works at the same company until they’re about 60-65 years old and ready to retire. In fact, it’s not unheard of for people to continue at the same company with short-term contracts even after they retire.

Ultimately, even if it’s becoming somewhat common to switch jobs mid-career, lifetime employment is still very much alive in Japan, and getting hired at graduation is still a vital part of job-seeking in Japan. Let’s now see the alternative.

What Is Job-Type Employment?

While the membership-type employment system may need a longer introduction, as it’s unique to Japan, you may very well be familiar with the other employment system that’s recently been becoming more popular in Japan, which is job-type employment.

Basically, job-type employment is the regular employment type commonly used in the U.S., Europe, and other Western countries. This system values experience, knowledge, and qualification instead of seniority, and employees are hired based on their skills.

Another difference that sets job-type employment apart is the fact that the employee's duties and position are clear and limited to their title. While an employee hired in a membership-based system can be assigned to various tasks depending on the company’s needs, an employee in a job-type employment system only works in the department they’re hired for.

In a similar fashion, in job-type employment, an employee’s location rarely changes. If it happens, it’s usually based on the employee’s consent or request.

While the pay increases according to seniority in a membership-type employment system, the job-type employment values performance, and salaries usually increase with title promotions. Employees are evaluated according to their performance and the value they bring to the company.

Lastly, as performance is a crucial aspect of job-type employment, unlike membership-type employment, job stability isn’t as prominent in this system. The contracts of those who underperform can very well be terminated, and positions can become obsolete as the landscape of business changes.

Why Are Companies Switching to Job-Type Employment?

First of all, globalization is, without a doubt, one of the key components of this shift in Japan’s employment landscape. As more and more businesses open up to the world and begin operating on an international level, competition is getting fiercer by the minute. 

Because companies that hire based on skills and experience and have clear titles can house literal “experts” in their fields, hiring people out of college and teaching them on the job simply doesn’t cut it when you want to compete on an international scale.

Another reason why companies are switching to job-type employment in Japan actually has to do with technological advancements, which is also related to globalization, but it’s a different facet of the shift.

In today’s global business scene, job positions, especially ones that are more technical in nature, are based on highly specialized expertise, given the opportunities of ever-evolving technology. While traditional Japanese companies that adopt a membership-type employment system used to be able to train anyone for pretty much any role, this is hardly the case anymore.

In addition, with the recent COVID-19 pandemic, more and more companies have been switching to remote work systems. 

I explained this in detail in my post on companies with remote work policies in Japan, but companies that have clear job titles are able to allow their employees to work remotely, whereas traditional, membership-based companies require much more supervision and are therefore unable to benefit from the perks of this system.

If you’re looking for examples to job-type employment, all of the companies we feature on the Japan Dev job board are modern companies that work on a job-type employment system. These companies are personally vetted by our team and we make sure to select companies that offer jobs based on skills and compensate their employees accordingly.

That being said, this system still brings along a few challenges due to the work culture that’s long been prominent in Japan, so let’s touch on a few of those before I conclude this post.

The Challenges Japanese Companies Face With Job-Type Employment

Given the benefits and the reasons I shared above, you may think that switching to a job-type employment system as quickly as possible is the solution, but the reality of the situation is a bit more nuanced than this.

For one, the work culture and the concept of team building in Japan is largely based on the basic principles of membership-type employment. 

What this means is that businesses may struggle to promote teamwork in a job-type employment system, and the sense of togetherness may get lost in the process. Because Japan employs different team-building practices than Western businesses, this has already become an issue.

Team members in a membership-based employment system are used to covering for the duties of one another. As the titles are interchangeable and the positions aren’t as clear, this used to be possible, but companies are now worried that this new system may disrupt the ongoing harmony and may lead to dysfunctional teams.

As you see, these are more than minor issues that need to be addressed before companies dive head-first into new employment styles, and because of this, the shift from membership-type to job-type employment can take longer than one might think.

Frequently Asked Questions About Job-Type and Membership-Type Employment

Before I go, I’d like to provide some answers to some of the most frequently asked questions regarding job-type and membership-type employment systems in Japan. Let’s take a look.

What Are The Main Types of Employment in Japan?

As far as employment types go, Japan has been a subscriber of the traditional membership-type employment, which used to be called “Japanese-type employment.” Nowadays, the country has shifted more towards job-type employment, where the duties of the employee and the conditions of employment are clear from the get-go.

What Are the Different Types of Employment Contracts in Japan?

In Japan, there’s full-time employment, which is unlimited, and contract-based employment, which is limited to the period of the labor contract. 

In addition to these, there’s also temporary employment (dispatch worker) where the employee and the employer don’t have a direct contract between them, and the employment is managed by a third party. You can learn more about these in my post on navigating Japanese labor contracts.

What Is The Most Common Employment Type in Japan?

Membership-type employment has long been the most common type of employment in Japan. However, since the beginning of the 2000s, job-type employment has been becoming more and more common among Japanese companies.

What Are The Key Differences Between Job-Type and Membership-Type Employment?

The key differences between Job-type and membership-type employment styles can be summarized as follows.

• Job stability: While membership-type employment works on a lifetime employment basis, job-type employment values skill and performance, and underperforming employees can be replaced.

• Pay: In membership-type employment, salaries increase based on the number of years an employee works at a company, while in job-type employment, this is based on performance and promotions.

• Tasks and duties: The tasks of an employee are vague and interchangeable depending on the company’s current needs in membership-type employment, while an employee’s duties are clear in job-type employment.

• Location stability: Employees in a membership-based company can be assigned to different branches and may have to move, but this is hardly ever the case in a job-based environment unless the employee is willing.