By Casey Wahl

Commentary Nov. 14, 2008 - 06:22AM JST ( 18 )

This is the second article in a three-part series exploring the contract employment market in Japan.

In the first part of this series, we explored the “Top 5 Contract Employment Myths” and identified positive aspects of working as a contractor in Japan. However, as evidenced by some of the feedback from readers of Japan Today, many people know someone who has had a poor experience working on a contract or “haken” basis.

Although it is an imperfect system, there are a lot of benefits to working on contract and many people do have good experiences. The negative perceptions are symptomatic of outstanding issues across the wider “haken” market that need to change to ensure that the real benefits of contract employment are realized by workers in Japan. To look forward, let’s first look back to the origins of contract in Japan, then make some predictions for the future of contract employment.

The growth of flexible employment in the form of contracting marked a break from the traditional Japanese “job-for-life” corporate mentality. The widespread use of “haken” workers started 20–30 years ago, a time when the lifetime employment system was at its peak. The issues that some “haken” workers continue to face today are rooted in the dynamics present when this form of employment first emerged. That dynamic was the need for companies to hire contractors for seasonal work, special projects or as a supplement to overall headcount in specific areas of need. At this time, organizations were in a more powerful position vis-à-vis contract workers, because it was the social norm for people to join a company as a permanent employee straight out of college.

If someone didn’t follow this traditional route, choosing instead to study abroad or pursue a creative passion, they often returned to the job market with much fewer options. During that time, the number of people pursuing alternative paths was small enough that often they had little choice but to accept unattractive salaries and unstable contracts. Consequently, contractors were seen as an easy way for corporations to get the extra labor they needed inexpensively. Those days are gone, but the negative perceptions from this time persist.

Japan is currently undergoing a paradigm shift. There are significantly more job seekers on the market that have not followed the traditional employment path than 20-30 years ago. Typically, they are people looking to enter the market after pursuing a dream or outside interest after graduation, as well as those looking to steer their career in a new direction. Their numbers have now grown to such an extent that the balance of power is shifting in favor of the contract employee. That means that these job seekers can begin to demand more pay, more stability, more responsibility and a future career path.

This shift is forcing employers to adopt a more mature approach to contract workers and discard the out-dated perception of contractors as an unskilled labor force. While it will probably take a few years for the phenomenon to spread across the wider employment market, we are seeing a number of positive changes in that direction.

Japan’s aging population is also promoting a major re-evaluation of the way that contractors are being deployed. Companies are beginning to lose a lot of retained knowledge as the baby-boomer generation retires, triggering a brain drain. To remain competitive in today’s marketplace, companies cannot afford to lose this knowledge base, and we are starting to see many companies hire back retirees on a contract basis soon after retirement. Their role can be anything from a 3-day a week part-timer, a trainer for younger employees, or a high-level corporate adviser. Companies are being increasingly flexible in finding solutions to retain this knowledge within their organizations, and we expect to see the number of these “Mentor ‘Haken’” to dramatically increase in the next few years.

The acute shortage of candidates with specialized skill-sets in Japan remains an issue and will continue to be so for the foreseeable future. Not enough job seekers with the right skill sets in IT, accounting, logistics, legal, and nursing are available to meet demand. As a consequence, companies are increasingly willing to give chances to job seekers without as much experience in Japan by starting them on contract with a view to make them permanent if they perform well. These in-demand skill sets offer foreigners an entry point into the professional job market through contract positions that become a stepping-stone to a successful career in Japan.

While there are many pockets of opportunity, it is fair to say that overall, Japan remains behind many overseas job markets in its use of contractors. The development of the market here has been held back by an image of contract work that has its roots in the way that “haken” was introduced in Japan several decades ago. However, shifting demographics are driving change and the use of contractors will continue to expand. What will emerge is a more flexible and robust employment market where job seekers have more choice.

It will take time for some of the peculiar dynamics of “haken” to be worked out across all sectors of the economy. However, as the Japanese contract market matures over the next 2–3 years, I am confident that the benefits of contract employment will increasingly gain recognition among employers & employees.

Casey Wahl is director of the Contract Division at Robert Walters, Japan’s largest foreign-owned specialist recruiter.