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A study on the Changing Welfare Regime in Japan during the Economic Recession: Applying the Perspective of Varieties of Capitalism

Shin, Dong-Myeon 1

1경희대학교

Accredited

ABSTRACT

It is generally said that changes in the Japanese welfare state since the early 1990s have been made by the government's responses to an aging society, in particular the increase of public pensions and health care for the elderly. In addition to this explanation, the following article argues that the change of production regime brought about by the lasting economic recession since the early 1990s has had an effect on the welfare regime, contributing to the expansion of state welfare. Japan had drawn great praise due to the unique characteristics of its production regime, which has maintained an institutional setting composed of the following: stable industrial relations with the lifelong employment system, a financial system providing patient capital based on the relationship between the main bank and enterprises, the stakeholder's enterprise governance system, the cooperative relationship among enterprises in keiretse(large conglomerates). After the collapse of its bubble economy, however, Japan has experienced a gradual change of the production regime from a stakeholder market economy to a shareholder market economy. The ratio of financial institutions(mainly banks) and non financial institutions(mainly employees) in the ownership of shares has decreased, while the ratio of foreign investors and individual shareholders has increased. Enterprises have increased the employment of irregular workers in order to reduce labor costs and raise labour flexibility. The stable collective industrial relations have been weakened by the introduction of new personal management skills, in particular the transition from seniority based wage system to performance based wage system. The institutional changes in the Japanese production regime have led to a break of institutional complementarities between the production regime and the welfare regime that had provided comparative institutional advantages prior to the collapse of the bubble economy. Full employment based on lifelong employment as well as generous enterprise welfare, which complemented a relatively low level of state welfare, has become increasingly difficult to maintain. Japanese enterprises have significantly decreased the expenditure of voluntary enterprise welfare. They have tended to consolidate the protection of insiders-that is, regular workers- but outsiders, irregular workers, have been discriminated against in wage, enterprise welfare, and social security. Growing concerns about social security contributions paid by enterprises have made Japanese enterprises prefer to ease their social security burden and instead increase the state's burden. Thus, the expansion of state welfare accompanied by the reforms of the social security system since the early 1990s have been influenced by the changed preferences and interests of enterprises regarding social welfare. They have reformed the selective affinity between production regime and welfare regime and as a result, the welfare mix has shifted towards the reduction of voluntary enterprise welfare and the expansion of state welfare.

Citation status

* References for papers published after 2022 are currently being built.