Been writing this paper for over a week now... Brain hurts. Its supposed to be 3000 words, im at 28 something if you include refrences. I just cant go on anymore. This is the result of hours and hours of work. I predict a 62%. Its hardly university quality but i never said i was good at papers!

If yall could take a gander and lemme know what you think before i hand it in id appreciate it. Here she is:

WEALTH DISTRIBUTION AND UNEMPLOYMENY IN AMERICA AND JAPAN

INTRODUCTION

The second President of the United States, John Adams once said, “The happiness of society is the end of government”. Currently in the United States and in many countries around the world there is unhappiness and the people are looking to government for answers! I am referring to the Occupy movement that started on September 17 2011 in the Wall Street financial district in New York City. Protesters have camped out on the public property since September and will continue to do so until some changes arise. The reason for the protest and slogan of the protest is “We are the 99%”. This refers to the enormous wage gap between the people with the top 1% of income and the rest of the people. In fact according to an article on Mother Jones (Gilson and Perot, 2011) The top 1% of American households earn an average of $1,137,684 a year and the bottom 90% earn an average of $31,244 a year.

There seems to be much distress in many nations around the world about this problem. Even in our small city of Winnipeg protestors gather around the legislation building. There is one place however that has not had the same response and that place would be, Japan. According to an article in Japan Realtime (Koh, 2011) Occupy Tokyo was somewhat of a failure. This is most likely attributed to the fact that the wealth distribution is among the best in the world. In fact a study done by the United Nations Development Programme (2009) found Japan to have a Gini index rating of 24.9 compared to America, which had a rating of 40.8.[1]

The difference in unemployment in these two countries is quite astonishing. For the longest time unemployment levels in Japan were among the lowest in the world. The unemployment level has risen slightly over the last few years but is still at a very low number, less than half of that in the United States. According to Eurostat the current level of unemployment in Japan is between 4-5% compared to America, which is close to 10%.

I believe that both the topics of wealth distribution and unemployment are somewhat linked and both major drivers in the occupy movement. The purpose of this paper is to discover reasoning as to why there is such a difference in wealth distribution and why are the unemployment numbers so different. I believe that it can be attributed to many different things, such as: The culture and history of the two nations, the way in which management treats their employees, how the employees treat management, union representation differences and finally labour laws protecting employees.

CULTURE AND HISTORY[2]

The first thing that should be discussed is the dominant state paradigms. In America the state paradigm is neoliberalism. With neoliberalism, competition within and between firms is seen as a good thing. In Japan the state paradigm is managerial corporist. With this state paradigm it is believed that cooperation within and between firms is much more beneficial to a strong economy than one that is competitive. In fact many companies are so cooperative that it is not rare to see companies not only sharing knowledge on business practices but also machinery and even employees. That kind of practice would not be seen as a good thing in America.

When European settlers first came to America there seemed to be an abundance of opportunity because land seemed to be endless. It was believed that the harder you worked would mean the more that you owned and having many possessions especially land showed your worthiness before God. The mixture of the state paradigm and the history of the country have lead to everyone being very individualistic. Everyone only looks out for himself or herself.

In Japan there is a belief in harmony, cooperation and stability. Being an individual is seen as a bad thing. After their defeat in the Second World War, it really brought the country together. For these reasons and because of the state paradigm, this has made Japan a collectivist country. Society is more important than the individual and their family.

The fact that America is an individualistic society and Japan is collectivist has a big impact on the wage gap. In America everyone is looking to get ahead of the person next to him or her. Each company wants to be better than all other companies. So while people are only looking out for themselves, they don’t care about equal distribution of wealth. As long as they have more money than the next person it is okay. In contrast in Japan the company comes first, even before the individual or their family. Japanese people want to see the company do well before they see themselves do well.

MANAGEMENT ORIENTATION[3]

The next area that attributes to the large wage gap is how employers treat their employees. In America employees are treated as if they are only resources. Employers treat employees however they want as employment and labour laws in America are so weak. Because of the At Will Doctrine employees can be dismissed without any just cause at any time without any compensation. American managements number one concern is to please the shareholders, next would be to please the customers and finally to please the employees. Management in America will usually only focus on short-term goals. Management would rather layoff employees than cut dividends for shareholders.

In Japan employees are treated much better. Management is very paternalistic over employees. The Government will provide incentives such as tax cuts for employers who offer things like health care and pensions. When it comes to dismissal of employees, According to Auer and Cazes (2003:162) there are actually laws that say the employee can only be dismissed if there is ‘just cause’ (1979 case law) and the employee must be given 30 days notice or 30 days pay (The Japanese Civil Code (Art. 627)). Japanese managements number one concern is their employees, second is their customers and finally the shareholders. Management in Japan has long-term goals. Management will only layoff employees as a very last resort. For example Gordon (1998:212) found that when Japan entered a recession in the early 90’s ‘Managers at the top five firms in the iron and steel industry reduced employment by one fourth from 1993 to 1996 without dismissing a single worker.’

When it comes to wage increases in Japan, there is a linear advancement between top executives and employees. Whatever raise the employees get, is the same raise that top executives will receive. This leads to a wealth distribution in companies of about 1/10^th between top executives and employees. Compare that to America where it is around 1/400^th between top executives and employees.

American employers treat their employees very poorly and thus would want to give them as low of a pay raise as possible or no pay raise at all. In America if the employees are unhappy with their pay or any other bargaining issue they can strike. However management does not need to give in to their demands and can just hire new staff to replace the old ones.

Japanese employers treat employees very well and will usually give employees as much of a pay raise as the company can handle. Every spring there is bargaining that occurs and it is usually about pay (called shunto). If the employees are unhappy with the outcome, they usually wont strike and instead will show their unhappiness by protesting on their lunch breaks or by wearing coloured arm bands. In fact according to the Economic and Labour Market Review the annual strike days in all industries and services per 1000 workers in Japan averaged between 1996 and 2005 were only one day compared to America which had lost just over five weeks of work due to strikes. All of these days lost due to striking in America could really have an effect on the wage gap between top executives and employers.

As mentioned earlier, Japanese management is very paternalistic towards their employees. It is actually quite crucial that wages be higher in Japan for a comfortable living. According to the IMD World Competitiveness Yearbook (2011: 340) out of the 59 countries that are looked at, Japan has the highest cost of living. If management is going to look after their employees it is that much more important that a higher wage is given.

EMPLOYEE ORIENTATION

Another possibility as to why there is such a difference in wealth distribution could be attributed to how the employees act towards management/ the company. In America it is becoming more common for employees to get a job, work there for a couple of years, gain the skills they need and then move onto the next company that will give them better wages, benefits etc. The term ‘life-time employment’ is becoming much more rare, especially in recent years. A study done by the U.S. Department of Labor (2006: 41) found that the amount of men with ten years or more of tenure at their current employer had decreased substantially between 1983 and 2004. For example for the age group of 60 to 64 year olds this number had dropped from 66% to 49% over that time period. In a different study done by U.S. Department of Labor (2010) they discovered that in January 2010 the median tenure for men was only 4.6 years. In another study shown in Employment stability in an age of flexibility (2003: 25), found that the percentage of labour force in America that had tenure longer than 10 years was only 25.8% in 2000 compared to 43.2% in Japan.

In Japan workers orientation are much different. Japan is known for having ‘life-time employment’. When employees start their career they normally stay with that company for the rest of their life. They have very high loyalty and commitment to their employers[4]. It makes sense for the employee to stay with a company for a very long time as Japanese companies major base for their wages and promotions are on seniority. The longer you are with a company, the higher pay you will receive and the better chance at obtaining a higher position in the company. If an employee were to switch companies mid way through their career, it is likely that they would have to start out at the bottom again.

It makes sense as to why Japanese management would be more reluctant to give pay raises to their employees than that of American management. The typical American worker is really only in pursuit of his or her own self-interest and their loyalty to the company is so low[5]. Why would management want to give them higher pay when they will just leave the company in a short amount of time? Japanese employees are much more loyal and the Japanese management should not have to fear their employees leaving.

Union Representation[6]

Union representation in each country is not particularly high if compared to some European countries. According to the OECD in 2010 trade union density in America was at 11.4% and Japans trade union density was at 18.4%, which is slightly above the average of OECD countries. The reason I believe that union representation has an effect of the wealth distribution is because I believe that Japanese unions are more involved and have a bigger role in the company.

In 1935 in America, the Wagner Act was passed giving people the right to organize a union. In the last 75 years this has weakened quite a bit. In order to receive certification you must get 50% plus one agreeing to have a union. The whole certification process takes around 40 days to complete. Quite a bit can happen in this time. Because of free speech in America, management can persuade employees to avoid joining the union saying things like if a union were to form, the company may have to shut down. If a union eventually does form, the first thing that happens is the first agreement must be established. Bad faith bargaining should not happen on either side (union or management) but if it does happen, there is really no remedy for it. Because of this many times the first agreement does not even get completed, rendering the union useless. An interesting statistic is that only 25 states in America have full collective bargaining rights.

The way that unions work in Japan is a little bit different than in America. In Japan they have cooperative enterprise unions such as the Toyota Autoworkers. These unions are unions only for the one enterprise. This makes there be a joint interest between unions and management because the future of the union is tied with the future of the company.

There may not be a majority of firms in Japan that have unions, but about 70% of firms with over 300 employees have consultation councils. These consultation councils are involved with the future of the company in such topics as strategy and human resource management.

Unions and these councils are much more prevalent in Japan than in America and it seems as if they take a much bigger role in the future of the companies and of the employee. That could be a partial cause to the wealth distribution variance.

LABOUR LAW

Unfortunately for Americans there is very little laws protecting their rights. As mentioned earlier there is the At Will Doctrine, which means that an employer can terminate employees for no reason at all. There are no laws against the administration of drug tests and lie detector tests. If employees refuse to take these tests, then because of the At Will Doctrine they can be terminated.

On the other hand there are some labour laws in Japan that do protect employees. As mentioned earlier article 20 in the Labour Standards Act states that an employee must be given 30 days notice before termination and if no notice is given, the employee must be given 30 days pay. According to a 1979 case law and as stated in Employment stability in an age of flexibility (2003), there are four conditions that must be met in order to justify the termination of an employee, which are:

· Employers should be faced with a compelling and unavoidable necessity for dismissals;

· They should have made every effort to avoid dismissals by, for example, transfers, farming-out of workers to affiliated companies, terminating employment of temporary and part-time workers, facilitating early retirements, reducing overtime work and suspending hiring;

· They should consult with trade union representatives and employees about dismissals; and

· They should establish reasonable standards and apply them fairly when selecting workers for dismissal. (pg.162)

The interesting thing about these conditions is condition number two. Employers must attempt to find an alternate solution. Employees in Japan are very well trained. Employers will cross train employees to be able to do a number of jobs within the company. If business is slow in one area of the company, instead of laying off their employees they can transfer these employees to other departments.

All of this can have a huge impact on the distribution of wealth. If American companies can fire a person for no reason, it is no wonder why around one in ten people are unemployed.

CONCLUSION

From the findings in this paper it becomes easier to understand why these people are out protesting day and night in New York and across America. However history predicts future and it is impossible to change the past; Management and workers have norms to follow; Unions are generally more prevalent and stronger in Japan; Labour laws are just not strong and practically inexistent in America. Is there one solution to solve all this? Does this mean that one country is better than the other? Not necessarily. Both economies are within the greatest of the world. But what does the future hold? If the wage gap continues to increase and so do unemployment numbers, there could be some serious consequences.