Postwar economic development provided quite and immense amount of status and income to the Japanese. Since the 1960s, close to 90% of the Japanese people consider themselves to fall somewhere in the middle-class according to a survey conducted by the Prime Minister's office. Today, status in society is determined mostly by one's employment. Out of the labor force that consists of more than 60 million people, 45 million of those are regular employees. And for those who are working in a large firm, they are usually hired at the time of school graduation and retire at the compulsory age of 60. This kind of long-term employment system makes employers feel that labor is more of a fixed cost than a variable cost.

Regular employment is not determined by a legal contract, but more in the style of a social relationship, where performance in a by-product of the whole process and not a cause and effect of getting paid. In western societies, industrial identity is more focused on skill, or what one does, but in Japan it is where the employee belongs, or which company he works in is the main concern.

Performance is not the purpose or goal of the Japanese firm, instead it is a corpora

Though change is an age-old tradition in Japan, its increasing rapidity tends to upset the older generations, exhilarates the younger ones, and creates havoc in lifestyles. Changes are everywhere, in society as well as in the economy. Given that Japan enjoys one of the longest life expectancies in the world, rapid aging of the Japanese population will combine with the prospect of severe labor shortage in the near future. This affluent society is promoting new values. In particular, young employees are starting to prefer present over future income, more free time over increased income and reward of capabilities over patient accumulation of experience. The economy is reaching maturity. The rapid evolution of technology demands creativity and knowledge of a more professional and immediate nature. Growth in production is slowing down and the service sector is getting larger. Globalization of business and yen appreciation impose on Japanese firms new developments, such as international division of labor, shorter working hours, emergence of foreign labor and also mergers and acquisitions. Hence the lifetime employment system and the concomitant salary system were thought of by many as being out-of-date and that it is impossible to maintain, especially when the economy takes a downturn. However, the fact that it has continued to function effectively as a stable system suggests that these arguments put forward in times of economic downturn mistook cyclical changes in economic fortunes for long-term structural changes.

The postwar innovation referred to as lifetime employment is a norm that the Japanese industry has constantly adjusted to the changing circumstances in the economy and in society. The norm, even when and where it could not be applied in its full complexity, as was the case of most small firms and during bad times suffered by the larger ones, provided regular employees with their major work motivation and a congenial work environment. It also allowed a steady upgrading of firm-specific human capital in the form of a core workforce composed of regular employees.

In order to constantly upgrade their core workforce and nurture information exchange, internal job rotation, at the rate of every two or three years, is common among regular employees. A fairly common occurrence among manufacturers, in the case of a business slowdown, is to send for a time, managers, technicians and even production workers into the field to help with sales. In more serious cases, larger enterprises take advantage of their size to transfer regular employees permanently to other activities within the firm, which often leads to a new subsidiary. Transfer involves an employee resigning from the original company and being re-employed by another. Usually it starts with the employee being seconded and after a period of time, transferred. In particular, the transfer of redundant personnel is considered socially as a better solution than unavoidable layoff.

In Japanese companies, the major incentive for a worker is promotion from within, a competitive process reflecting the merit in years, otherwise known as 'nenko', namely the years spent in the enterprise and the accumulated experience of bot

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Approximate Word count = 2167
Approximate Pages = 9 (250 words per page double spaced)