Labour Market Deregulation in Japan and Italy

Worker Protection under Neoliberal Globalisation

Hiroaki Richard Watanabe

• Publisher: Taylor & Francis
• Year: 2014
• eBook ISBN: 9781317689645
• Edition: 1
• Topic: Politik & Internationale Beziehungen
• Subtopic: Amerikanische Regierung

Japan and Italy encountered severe economic problems in the early 1990s, and the governments had to deal with those issues effectively under the increasing neoliberal pressures of globalisation. In this context, labour market deregulation was considered an effective tool to cope with those economic problems. However, the forms and degrees of labour market deregulation in the two countries were quite different.

This book seeks to explain the differences in labour market deregulation policies between Japan and Italy, despite the fact that the two countries shared a number of similar political, social and labour market (if not cultural) characteristics. Uniquely, it takes a political, rather than economic or sociological perspective to provide a theoretical and empirical analysis of the processes of labour market deregulation in the two countries. The precarious working conditions of an increasing number of non-regular workers has become a prominent social issue in many industrialised countries including Japan and Italy, but the level of the protection for these workers depends on a country's labour market policies, which are affected by the power resources of labour unions and labour policy-making structures. This book provides a useful perspective for understanding the root causes of this phenomenon, such as the diffusion of 'neoliberal' ideas aimed at promoting labour-market flexibility under globalisation, and demonstrates that there is still room for politics to decide the extent of deregulation and maintain worker protection from management offensives even in an era of globalisation.

Labour Market Deregulation in Japan and Italy: Worker Protection under Neoliberal Globalisation will appeal to students and scholars of Japanese politics, Italian politics, political economy and comparative politics.

1 Introduction

Governments in industrialised countries implemented labour market deregulation under the increasing neoliberal pressure of globalisation, and Japan and Italy were no exceptions to this trend. In response to employers’ demand, the governments in both countries implemented deregulation aimed at flexible use of non-regular employment such as temporary agency work and fixed-term contracts from the 1990s. Labour market deregulation was implemented during the economic stagnation after the collapse of the bubble economy in Japan and under the fiscal constraint of the Maastricht convergence criteria for the European Monetary Union (EMU) in Italy. However, the ways labour market deregulation was introduced in these countries were quite different despite the common neoliberal pressure of globalisation. While Japan introduced quite extensive labour market deregulation with a major exception of the maintenance of rigid dismissal rules, Italy maintained restrictive and worker-protective regulations to a greater extent. This difference resulted in the greater use of non-regular employment and labour market flexibility in Japan than in Italy. The ‘working poor’ has become more visible in Japan after the labour market deregulation in the early 2000s, although this issue has certainly existed in Italy too, where young people have been struggling to find a stable regular job as in Japan.

Some scholars argue that non-regular employment becomes more attractive when regular employment is more regulated (Sarfati 1998; Denys 2004). Although this may be true, the use of non-regular employment also depends on how strictly the government regulates this type of employment. For example, the Italian government maintained strict regulation of not only regular employment but also non-regular employment before the early 1990s and the legal use of non-regular employment was limited. In that situation, the wide availability of subcontracting and the existence of a large number of small firms and the informal sector provided mechanisms for maintaining flexibility in the labour market. However, such flexible mechanisms became insufficient for Italy to reduce high unemployment and enhance its economic ‘competitiveness’ and labour market deregulation came to be considered an essential measure to deal with these issues by the early 1990s. The Japanese government also maintained restrictive employment regulation before the early 1990s with the exception of part-time work, which had already been prevalent. However, employers’ demand for labour market deregulation increased in the early 1990s as a result of the economic stagnation after the collapse of the bubble economy and the greater necessity for flexible labour markets to cope with the intensified economic competition from neighbouring Asian countries. In addition, the ‘financialisation’ of the economy contributed to the greater representation of shareholders’ interests in corporate governance and changed human resources management and industrial relations in a way to enhance the power resources of capitalists against labour (Dore 2008, 2009; Gamble 2009; Peters 2011; van der Zwan 2014).

Against this background, the Japanese and Italian governments implemented labour market deregulation almost at the same time in the late 1990s and the early 2000s. In the late 1990s, the opposition parties controlled the less powerful upper house in Japan and the centre-left coalition controlled the government in Italy. In the early 2000s, in contrast, the coalition led by a dominant centre-right party (Liberal Democratic Party, LDP) controlled both Houses in the Diet (parliament) in Japan and the centre-right coalition controlled the government in Italy. While labour market deregulation in the late 1990s was less extensive than in the early 2000s in both countries, Japanese labour market deregulation was more extensive than the Italian case.

Main questions and arguments

This study conducts a comparative analysis of the politics of labour market deregulation in Japan and Italy from the early 1990s, when labour market deregulation became a major political and economic issue in both countries, until the early 2000s, when the last major labour market deregulation was implemented in both countries (before the Monti-Fornero Reform was introduced in 2012 in the Italian case).¹ The main question to be addressed is: ‘How we can explain the differences in the form and extent of labour market deregulation in Japan and Italy despite the common neoliberal pressure of globalisation, especially given some similar labour market characteristics between these countries’.² For example, Japan and Italy shared such characteristics as strict regulation of regular workers’ dismissal and the existence of a large number of small and medium-size enterprises (SMEs). In addition, Japanese and Italian labour markets were characterised by dualism in terms of company size (large companies vs. SMEs), employment type or status (relatively stable regular employment under lifetime or long-term employment vs. unstable and low-paid non-regular employment) and industrial sector (internationally competitive export-oriented sectors vs. politically protected inefficient sectors).³

To answer the main question of why the Japanese and Italian governments implemented labour market deregulation differently despite the common neoliberal pressure of globalisation and some similar labour market characteristics in these countries, the following related questions are examined:

• How did globalisation affect the politics of labour market deregulation in Japan and Italy?

• Who promoted and opposed labour market deregulation in these countries?

• How and why did the power distribution between labour and employers change in the 1990s and the early 2000s?

• How did labour policy-making structures change?

• Under what conditions can we identify the partisan effects of the government on labour market deregulation in Japan and Italy?

• What can we learn about the commonality and diversity of capitalism under globalisation from the Japanese and Italian cases of labour market deregulation?

By examining these questions, this study claims that the differences in the form and extent of labour market deregulation between Japan and Italy can be explained by the different distribution of power resources between labour and employers and the resulting changes in labour policy-making structures in these countries. When combined with the ‘power resources’ model (Korpi 1983, 2006; Esping-Andersen 1990, 1998; Huber and Stephens 2001 among others), ‘varieties of neoliberalism’ (VoNeoliberalism) perspective (Cerny et al. 2005; Pontusson 2005; Baccaro and Howell 2011; Howell and Givan 2011; Heyes, Lewis and Clark 2012 among others), which identifies increasing neoliberalisation among capitalist economies while recognising the diversity in the form and extent of neoliberalisation, is better suited for explaining Japanese and Italian labour market deregulation than ‘varieties of capitalism’ (VoC) perspective (Hall and Soskice 2001; Hancké et al. 2007 among others), which suffers from some analytical deficiencies such as the insufficient analysis of political conflict due to its focus on ‘institutional complementarities’ and firm-centred ‘coordination’. Both Japanese and Italian governments implemented labour market deregulation as a result of the intensified economic competition and the rise of neoliberalism under globalisation, but the forms and extents of deregulation were different because of the differences in domestic political factors, especially the power distribution between labour and employers and labour policy-making structures. The study also claims that the existence of the partisan effects of the government on labour market deregulation depends on the amount of the power resources held by labour unions and their institutionalised access to policy-making.

Theoretical issues on the politics of labour market deregulation

This study reviews the literature related to the politics of labour market deregulation and examines the applicability of the relevant theories to Japanese and Italian cases. The first theoretical concept to be examined is neo-corporatism (Schmitter 1979; Lehmbruch 1982). Neo-corporatism is based on the tripartite policy-making among the government and government-selected peak associations (employers and labour unions) that monopolise the representation of socio-economic interests. These peak associations possess organisational structures based on internal hierarchy and highly centralised decision-making. As some scholars point out, the concept of neo-corporatism fails to explain the institutionalisation of tripartite labour policy-making based on concertation (concertazione in Italian) in the countries which do not possess industrial structures deemed necessary for neo-corporatist policy-making (Regini 1997; Regini and Regalia 1997). In contrast to neo-corporatism, concertation is based on industrial democracy, i.e. democratic decision-making by labour unions that reflects rank-and-file voices rather than hierarchical decision-making (Baccaro 2003). This study will examine the applicability of the concept of neo-corporatism in the political processes of Italian and Japanese labour market deregulation.

This study builds upon the analytical framework of ‘power resources’ (Korpi 1983, 2006; Esping-Andersen 1990, 1998; Huber and Stephens 2001), as the distribution of power resources between labour unions and employers was crucial to deciding the form and extent of Japanese and Italian labour market deregulation. While scholars with power resources perspective emphasise union density and organisational unity as the major power resources of labour unions, this study emphasises that the maintenance of a common policy stance and the institutionalised access to policy-making by labour unions are also crucial to their political power.

Despite the arguments that the partisan composition of the government is hardly important in deciding the characteristics of labour market deregulation (for example, Baglioni 1989; Compston 1997; Hamann and Kelly 2003), this study claims that partisan effects are likely to be identified under certain conditions. While both right and left governments implemented labour market deregulation, left governments usually made more concessions to labour unions, given their similar ideological and policy preferences. For example, labour market deregulation during the centre-left governments in Italy was limited, as they relied on the political support of labour unions that promoted the concept of ‘class solidarity’ as a strategy to maintain their political power by organising an increasing number of non-regular workers. This study proposes that the partisan effects of the government on labour market deregulation are likely to be identified in the form of more limited deregulation during left governments on the condition that powerful labour unions enjoy institutionalised access to policy-making. Partisan effects are also likely to be identified in the form of more extensive deregulation during right governments on the condition that weak labour unions lack institutionalised access to policy-making. When these conditions do not hold, partisan effects are likely to be attenuated.

As for institutional change, the new institutionalism based on the concept of ‘path dependence’ was criticised for its static theory and institutional determinism.⁴ As a result, some scholars of the historical institutionalism (for example, Streeck and Thelen 2005; Mahoney and Thelen 2009) proposed a typology of ‘gradual but consequential’ institutional change as the modes of institutional change in contrast to the ‘punctuated equilibrium’ model (Krasner 1984).⁵ As for the sources of institutional change, ‘agency’ factors such as the distribution of power resources between labour and capitalist classes (Korpi 1983, 2006; Esping-Andersen 1990, 1998; Huber and Stephens 2001) and ‘political entrepreneurs’, who invest their political and economic resources in the institutional change they desire (Kingdon 1995; Kerwer 2001; Crouch 2005; Tiberghien 2007), are important to this study. ‘Ideas’ are also considered to be a source of institutional change. Neoliberalism, which has become prominent as a result of the intensified economic competition under globalisation, is particularly relevant to this study (Cerny et al. 2005; Baccaro and Howell 2011; Heyes, Lewis and Clark 2012). In addition, the institutional concept of ‘veto points’ is useful for explaining the pace and extent of institutional change (Immergut 1992; Tsebelis 2002).⁶

Finally, this study critically examines VoC perspective (Hall and Soskice 2001; Hancké et al. 2007 among others) with respect to the commonality and diversity of capitalism under globalisation. In the original VoC perspective (Hall and Soskice 2001), capitalist economies are composed of liberal market economies (LMEs) and coordinated market economies (CMEs). Although VoC perspective based on the concept of ‘institutional complementarities’ is useful for identifying some important characteristics of market economies, it essentially provides a static theory of capitalism without recognising an important trend of increasing deregulation and neoliberal commonality between LMEs and CMEs under globalisation. This is partly explained by VoC’s focus on skill analysis with a manufacturing bias without paying enough attention to the growing service sector and its lack of analysis of political ‘conflict’ between labour and capitalist classes due to its analytical focus on firm-centred ‘coordination’. In addition, while scholars with VoC perspective predict increasing within-regime ‘similarity’ by focusing on the ‘comparative advantages’ of LMES and CMEs, within-regime ‘diversity’ can actually be identified. This study claims that VoNeoliberalism perspective (Cerny et al. 2005; Pontusson 2005; Baccaro and Howell 2011; Howell and Givan 2011; Heyes, Lewis an...

Table of contents

• Cover Page
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Illustrations
• Series Editors’ Preface
• Acknowledgements
• 1 Introduction
• 2 Literatures and theories on the politics of labour market deregulation
• 3 Historical background of Japanese and Italian labour market deregulation
• 4 The politics of labour market deregulation in Japan from the 1990s until the early 2000s
• 5 The politics of labour market deregulation in Italy from the 1990s until the early 2000s
• 6 Comparative politics of labour market deregulation in Japan and Italy
• 7 Conclusion
• Appendices
• Glossary of terms and abbreviations
• Index