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The Evolution of Employment Relations in U.S. and Japanese Manufacturing Firms, 1900-1960: A Comparative Historical and Institutional Analysis
 

Chiaki Moriguchi

NBER Working Paper No. 7939*
Issued in October 2000
NBER Program(s):   DAE    LS

---- Abstract -----

This paper offers a comparative study of the evolution of employment systems in the U.S. and Japan, using a game-theoretic framework in which an employment system is viewed as an equilibrium outcome of the strategic interactions among management, labor, and government. The paper identifies parallel institutional developments in large manufacturing firms in the U.S.and Japan during the first three decades of this century. In both countries, employment relations evolved from ones governed by simple, short-term contracts with individual bargaining toward employer paternalism' characterized by implicit, long-term contracts and company-wide employee representation.The paper then documents the subsequent processes of bifurcation. While Japan continued down the same path during the 1930s,the U.S. witnessed the breakdown of implicit contracts during the Great Depression, which eventually led to an endogenous hange in the legal framework. The paper describes how the two institutional paths further diverged during WWII under wartime regulations, and explains why Japan's trajectory did not converge to the American system despite the legal reforms in Japan under U.S. occupation. By the early 1960s, explicit, elaborate, and legally enforceable employment contracts and industrial unionism had developed in large U.S. manufacturing firms, whereas implicit, ambiguous, and self-enforcing employment contracts and enterprise unionism had emerged in their Japanese counterparts.

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The New York Times - Travel - Royal Treatment

        April 13, 2000

        Unions March Against China Trade Deal
      # Related Article Business-Minded Democrats Create a Party Split on China
        By STEVEN GREENHOUSE and RICHARD W. STEVENSON
        WASHINGTON, April 12 -- Thousands of steelworkers, truck drivers, auto workers and other union members rallied on Capitol Hill and swept through the halls of Congress today in a show of muscle intended to block a trade agreement with China.

        Their message, conveyed by union leaders and rank-and-file members who came from as far away as Michigan and Nebraska, was that trade was working for American corporations but not for American workers.

        CHINA-U.S. TRADE DEAL

      # Recent Coverage Clinton Stumps for Chinese Trade Pact (April 4, 2000)
      # China Trade Bill Supporters Pushing for Vote by May (March 29, 2000)
      # Taiwan Calm, So China Gains in Trade Talks (March 24, 2000)
      # Details of China Trade Pact Released by U.S. (March 15, 2000)
      # White House to Publish Accord on China's Entry Into W.T.O. (March 14, 2000)
      # White House Says Votes Are Lacking on Chinese Trade (March 10, 2000)
      # Clinton Sends to a Wary Congress a Long-Delayed China Trade Bill (March 9, 2000)
      # China and Europeans Break Off Talks on W.T.O. Membership (Feb. 25, 2000)
      # Threat Seen to Trade Deal to Let China Join W.T.O. (Feb. 24, 2000)
      # W.T.O. Head Hopeful on China Entry (Feb. 19, 2000)
      # Gore Back in Step With White House Over China Trade (Feb. 19, 2000)
      # White House Steps Up Efforts for China Trade Deal (Jan. 10, 2000)

        Text
      # Full Text of Clinton's Remarks on China Trade Bill (March 9, 2000)

        Negotiations Timeline
        April - November 1999

        April 6 Chinese and American trade representatives conclude accords on a series of contentious issues involving agriculture, leaving still unresolved telecommunications, banking and other questions. Read article.

        April 8 President Clinton and visiting Prime Minister Zhu Rongji fall short of closing on the trade deal, with Clinton rejecting as inadequate what the Chinese considered major concessions. But they commit to completion by the end of the year. Read article.

        April 13 Clinton telephones Zhu to restart negotiations. Read article.

        April 26 Chinese negotiators meet in Beijing with representatives of the European Union. Read article.

        May 7 NATO accidentally bombs the Chinese embassy in Belgrade, prompting the Chinese to suspend some ties and halt W.T.O. talks. Read article.

        May 26 Congress releases a report accusing China of extensive military espionage. Read article.

        July 26 Economic talks resume in Beijing, but the W.T.O. issue remains frozen.

        July 27 House votes to renew normal trade relations with China for another year. Read article.

        July 30 United States agrees to pay China $4.5 million in compensation for the embassy bombing. Read article.

        September 11 Clinton and Jiang Zemin declare an end to months of estrangement, and meetings to discuss W.T.O. membership begin again. Read article.

        September 27 Negotiators meet again in Washington but make no progress.

        October 16 Clinton telephones President Jiang again.

        October 24 Treasury Secretary Lawrence Summers meets with Zhu in China, with little resulting. Read article.

        November 4 Military relations between China and the United States resume. Read article.

        November 6 Clinton and Jiang again speak by phone, arranging a meeting between the Chinese and American teams.

        November 8 U.S. Trade Representative Charlene Barshefsky and top Clinton aide Gene Sperling head for Beijing for final talks. Read article.

        November 13 A surprise meeting with Zhu gives new life to the negotiations, which had all but broken down. Read article.

        November 15 W.T.O. agreement announced. Read article.

        News Analysis
      # One Giant Step for Jiang's China (Nov. 21, 1999)
      # Market Place: U.S. Investors Salivate Over Chinese Stocks in Pact's Wake (Nov 18, 1999)
      # Riding Winds of Reform, Yet Mired in Orthodoxy (Nov. 17, 1999)
      # A Deal the United States Just Couldn't Refuse (Nov. 16, 1999)
      # Trade Debate Shows Frictions of Shrinking World (April 11, 1999)

        Maps
      # Eastern China from Merriam-Webster's Atlas
      # Western China from Merriam-Webster's Atlas

        Forum
      # Join a Discussion on China and Taiwan

        Issue in Depth
      # China: Communism at 50

        Related Web Site
      # U.S.-China Relations, special report from the Asia Society

        While the immediate issue is whether Congress should approve a deal negotiated by the Clinton administration to bring China into the World Trade Organization, the rally was also a forum for a more diffuse anxiety about economic globalization and its effects on job security at home and on poverty, the environment and human rights around the world.

        "This is part of a long-term campaign to make the global economy work for working families," John J. Sweeney, the president of the A.F.L.-C.I.O., told the thousands of placard-waving union members assembed on the west side of the Capitol.

        The day served to kick off a series of demonstrations planned by a diverse coalition of groups for much of the next week around meetings of the International Monetary Fund and the World Bank.

        Along with the World Trade Organization, those institutions have come to embody, to their critics at least, the perils of placing corporate and financial concerns ahead of ordinary people in managing the increasingly free flow of money, jobs and goods across borders.

        Many union members attending today's rally said they were not against trade in general and were not naïvely demanding a return to a simpler, more secure world. Instead, they said, they are only opposing a deal with a country that does not respect workers' rights and would stop at nothing, in their view, to steal the jobs that are the backbone of the American middle class.

        "Asking our leaders to keep our jobs in our country is not living in the past," said Jim Brookins, a quality control technician and local union official who traveled here from Rayland, Ohio. "It's preparing for the future."

        Proponents of the trade deal with China said that the unions were misguided and that the best route to a stronger economy and more security for workers was to open up new markets for American goods. The agreement would make permanent the normal trade relations that China has with the United States, which are now subject to annual renewal.

        "A few thousand people bused to Washington today by A.F.L.-C.I.O. labor bosses can't change the fact that the sky is blue, the earth is round and trade is the key to the United States creating 20 million new jobs and the lowest unemployment in four decades," said Representative David Dreier, a California Republican who is helping lead the push to win approval for the China deal in the House.

        In an effort to counter the unions' message, the administration released a Commerce Department study showing that every state would benefit from increased trade with China. And Gen. Colin L. Powell, the former chairman of the Joint Chiefs, endorsed the agreement, saying that among its other benefits it would be in the nation's security interests.

        The administration's agreement with Beijing on the terms under which China would join the trade organization is likely to be approved by the Senate, but its fate in the House is unclear. Both parties are split to some degree, and the outcome hinges largely on the votes of about 75 undecided Democrats.

        Among them is Representative Thomas C. Sawyer of Ohio, whose district encompasses the heavily unionized Akron area. Mr. Sawyer voted to approve the North American Free Trade Agreement in 1993 over union opposition.

        This afternoon Mr. Sawyer got a visit from a union delegation that included Dave Prentice, a pipefitter at a Goodyear Tire and Rubber plant in Akron. "If this thing passes, it will hasten the deindustrialization of the United States," Mr. Prentice said after the meeting.

        The union members said Mr. Sawyer had assured them that he would vote against the trade deal unless there was an accompanying bill calling for sanctions if China violated labor rights or other human rights. Some Democrats are trying to develop such a bill in the hope that it would allow them to vote for the trade agreement without giving up the leverage that the annual Congressional debate over trade privileges have provided to send a signal to Beijing.

        The tangled politics of the issue were on full display today. Labor leaders were putting most of their pressure on Democrats, warning that failure to back the union position on the China deal could lead to a lack of support for the party from labor in the November elections.

        The Teamsters union invited Patrick J. Buchanan, who is seeking the Reform Party's presidential nomination on an anti-trade platform, to speak at a separate rally the union held today -- a clear warning to Vice President Al Gore, who has said he would renegotiate aspects of the pact with China if he is elected president.

        On the other hand, most of the unions regard helping Mr. Gore reach the White House and helping the Democrats regain control of the House as crucial to advancing the labor agenda, raising questions about how hard the unions are willing to push to block the trade deal.

        "It's unfortunate that the president took this time to bring forward this trade agreement, because to some extent it does split us," said James P. Hoffa, president of the International Brotherhood of Teamsters. "It should not have been done."

        The police no longer offer estimates of the size of crowds at political events in Washington, and it was unclear whether the rally attracted the 15,000 people cited by the unions.

        Labor leaders worked hard during the last month to round up workers to attend today's lobbying effort, but union members said it did not take much to persuade them to come.

        For many, the impetus was their regret at not having fought harder in 1993 to stop approval of the North American Free Trade Agreement, which workers in the most affected industries consider to have been a disaster for American jobs.

        During a break between visiting Congressional offices, Ralph Falls Jr., a Teamster who drives trucks for a bakery in Reading, Pa., said friends of his had lost their jobs when a bleach factory closed and moved its operations to Mexico.

        "Nafta was supposed to help create more jobs, and it took away more jobs," he said. "China will do the same thing." Studies about the effect of Nafta have generally found that it created fewer jobs than its proponents predicted and killed fewer jobs than its critics have asserted. But backers of the trade deal with China acknowledge that they have to do a better job of selling its benefits.

        "Supporters of trade with China and open markets have to become more sensitive to the anxieties caused by the pace of change, which unfortunately are disproportionately and inaccurately blamed on trade," said Gene Sperling, the White House economic adviser.

        "Never had the case been stronger for jobs and weaker for dislocation than an agreement in which we don't open our market one bit and China opens its market dramatically," Mr. Sperling said.