Introduction

The employment practices of Japanese enterprises exhibit unique characteristics that set them apart from those in other countries. Commonly referred to as the ‘Japanese employment system,’ this set of practices extends beyond the workplace, shaping domains such as education, social security, politics, and even personal identity. Sociologist Oguma Eiji (2019, p. 9) has described it as a ‘bundle of customs.’ Although the Japanese employment system is taken for granted by the Japanese, it was first brought to scholarly attention by James Abegglen (1958), who conceptualised it as a distinct corporate culture. He identified its defining features—lifetime employment, the seniority-based pay system, and enterprise unions—which came to be collectively recognised in Japan as the ‘Japanese management system.’ His work marked the recognition of Japanese corporate culture as an object of intercultural analysis. However, as Japan entered a period of low economic growth, research on this system declined in management studies. Nonetheless, the topic has continued to be explored in various disciplines, including labour economics, sociology, law, and anthropology.

This study is motivated by the enduring social issues historically and currently associated with the Japanese employment system. These include gender inequality, disparities between regular and non-regular employment, and issues faced by the so-called ‘Employment Ice Age Generation.’ Japan has strict employment protection regulations, safeguarding the status of regular employees, but this security is maintained at the expense of non-regular employees. Non-regular employment—including part-time, temporary, and contract-based jobs—is characterised by low wages and job insecurity. Furthermore, the rigidity of the employment system slows corporate adaptation to change, making it poorly suited for digital transformation and contributing to economic stagnation. Although both the government and business leaders have attempted to reform the employment system, Japan’s distinctive employment practices remain resistant to change, diverging significantly from global trends. This suggests that economic principles are constrained by social customs—a phenomenon inadequately explained by either economics or sociology and one that calls for new analytical approaches.

This study focuses on the hidden structure of the seniority-based pay system. The system of annual wage increments incorporates elements that defy economic rationality, concealing an underlying logic of exchange. Here, ‘exchange’ is understood in the Lévi-Straussian sense, specifically the ‘exchange of women.’ This paper aims to demonstrate, through a structuralist lens, that the seniority-based pay system functions as an exchange system homologous to the ‘exchange of women.’

The most significant proposition put forth in The Elementary Structures of Kinship (Lévi-Strauss 1967) is that ‘marriage is an exchange of women between groups.’ This foundational concept in structural anthropology continues to offer analytical value for understanding contemporary social formations. According to Lévi-Strauss (1963), exchange is homologous to language—it is a form of communication that expresses unconscious structures. Just as humans create language, they also create kinship. Exchange persists through cycles of gift-giving and reciprocation, sometimes resulting in highly complex marriage rules. Such structures of exchange shape not only the internal organisation of Japanese enterprises and workplace culture but also delineate external boundaries, thereby fostering a culture of exclusion. This paper examines how the seniority-based pay system functions as an exchange system that not only defines the internal structure of Japanese enterprises but also shapes broader aspects of Japanese society. While anthropological studies on the marginalisation of certain groups in Japan exist (Roberson 2016, pp. 280-283), this paper does not incorporate them into its structuralist framework.

In anthropology, the scale of an analytical subject varies. While some studies focus on individual symbols or rituals, others analyse large-scale structures such as marriage. Marriage involves exchange, ritual, and symbolism, making it a macro-level phenomenon that cannot be grasped in its entirety through direct observation. Lévi-Strauss's kinship theory analyses marriage structures globally, revealing universal principles. This paper adopts a similar structuralist approach, examining the larger subject of the Japanese employment system as a whole and analysing the seniority-based pay system as an underlying structure within it. Drawing on previous studies on employment in Japan, this paper employs a certain level of abstraction and synthesis necessary for structuralist analysis. By uncovering this underlying structure, we can gain a clearer understanding of societal formation and identify possibilities for structural transformation.

Overview of the Seniority-Based Pay System

Definition of the Seniority-Based Pay System

The seniority-based pay system is a compensation framework in which wages increase with age. In Japan, this system is widely implemented among regular employees in large enterprises. According to the 2023 Basic Survey on Wage Structure published by the Ministry of Health, Labour and Welfare (MHLW), in the case of general workers, the wage difference between male university graduates aged 20–24 and those aged 55–59 is approximately 2.14 times, while for female employees, it is about 1.63 times. Moreover, among regular employees in large enterprises, the wage multiplier is likely to be even higher. More important than the numerical gap itself is the institutional role of years of service as the primary determinant of wage increases. In other words, the seniority-based pay system is a widely implemented wage framework in Japan. In addition to wages, bonuses, retirement allowances, and corporate pensions are also considered part of total compensation in Japan. Notably, retirement allowances are often designed to be more advantageous for employees with longer tenure, making them an integral component of the seniority-based pay system.

The tendency for wages to increase with age is observed in other countries as well. However, compared to other nations, Japan’s wage system exhibits a steeper wage profile. The existence of seniority-based pay systems as formal institutions is significant, as they institutionalise wage increases beyond mere statistical trends. Outside of Japan, South Korea has also adopted the seniority-based pay system in certain enterprises (Lee and Kim 2025).

However, not everyone benefits equally from the seniority-based pay system. The benefits of the steep wage profile are concentrated among regular employees in large enterprises. According to estimates by Oguma (2019, p. 40), only about 30% of the workforce belongs to the group that enjoys the advantages of the seniority-based pay system. Employees of small and medium-sized enterprises (SMEs) experience lower wage growth than those in large enterprises and are considered to have a weak seniority-based pay system. Moreover, even within large enterprises, female employees tend to experience lower wage growth rates. On the other hand, non-regular employees—including dispatched workers, temporary contract workers, and part-time workers—are generally excluded from the seniority-based pay system. They typically earn low wages, receive minimal wage increases, and face the risk of dismissal during economic downturns. Historically, these workers have served as a ‘buffer workforce,’ with wages and working conditions that differ significantly from those of regular employees.

Since the collapse of Japan’s economic bubble in 1991, many enterprises have reviewed their compensation systems and introduced performance-based pay frameworks. Nevertheless, although the wage curve has statistically flattened, the seniority-based pay system remains largely intact. The 2006 White Paper on the Labour Economy revised the previous assumption that the flattening of the wage curve was irreversible. Instead, it reported that between 1995 and 2005, enterprises maintained and, in some cases, reinforced the tendency to emphasise employee tenure and reflect it in wage evaluations (MHLW 2006, p. 227). Under the challenging business conditions of the time, performance-based pay likely served as a nominal justification for what was effectively a real wage reduction. In conclusion, the seniority-based pay system remains intact in contemporary Japan.

It is also common to discuss seniority-based pay system in conjunction with lifetime employment. In practice, however, Japan’s lifetime employment system functions primarily as a guarantee of job security until the mandatory retirement age. The retirement system can be seen as a structural consequence of the seniority-based pay system. If employees continue working beyond the age of 60 under a seniority-based pay framework, their wages would become excessively high, necessitating a mandatory retirement system. Furthermore, upon re-employment after retirement, wages are significantly reduced, demonstrating that the high pre-retirement wages were not necessarily reflective of an individual’s actual productivity or capability. Accordingly, both the mandatory retirement system and post-retirement wage frameworks should be interpreted as institutional byproducts of the seniority-based pay system.

The History of the Seniority-Based Pay System

Scholars have proposed three major theories regarding the origins of Japan’s seniority-based pay system. The first attributes its emergence to the Taishō era. Following World War I, the rapid growth of heavy industries led to a shortage of skilled workers, prompting enterprises to adopt an in-house apprenticeship system (kogai yosei). A range of mechanisms—seniority allowances, retirement benefits, bonuses, and periodic salary increases—were introduced to promote the long-term retention of skilled workers (Kinoshita 1997, p. 165).

The second claim situates the origins within the wartime regime. In 1938, the National Mobilisation Law was enacted, and after the outbreak of the Pacific War, wage controls were implemented. This period witnessed the institutionalisation of a system of uniform wage increases for all employees (Noguchi 1995, p. 26) [1]).

The third claim asserts that the seniority-based pay system, as it exists today, was established in the immediate aftermath of World War II. During the ‘October 1946 Struggle,’ the Japan Electric Industry Workers' Union (Densan) successfully negotiated a wage structure that broke away from the postwar starvation wages, achieving a significant wage increase (Kinoshita 1997, p. 175). This pay framework is widely regarded as the direct predecessor of the contemporary seniority-based pay system. In this study, we conceptualise the seniority-based pay system as a form of exchange that originated at this point, as continuity in wages constitutes a core condition for the logic of exchange.

In 1946, Japan faced severe shortages of goods, accelerating inflation, and widespread economic hardship, leading to intensified labour movements. Densan launched a prolonged labour struggle centred on three key demands, including wage increases, and successfully secured a living wage (seikatsukyu-chingin). The primary component of wages under this system, basic subsistence pay (seikatsuhoshokyu), was determined based on an employee’s age and number of dependents. This pay framework was based on the egalitarian ideals of postwar democracy, ensuring a basic standard of living through objective criteria free from managerial discretion (Kawanishi 2001, pp. 5-6). The seniority-based pay system spread rapidly across Japan.

This wage structure was underpinned by an egalitarian logic that prioritised family livelihood in a period where mutual support among workers was vital. However, it also contained an inherent tension: ‘It was continuously questioned whether it could genuinely function as a standard of equality’ (Kinoshita 1997, pp. 175-176). Since wages were determined by age and family size rather than by individual productivity, criticism arose from both labour and management, arguing that this was not true equality. The most vocal opposition came from business leaders and the government. In the 1950s, corporate management advocated for a shift to job-based pay, aiming to lower wages for middle-aged and older employees. The Japan Federation of Employers' Associations (NikKeiRen) and other business groups emphasised labour quality and quantity over age and family size. The government, in its 1960 ‘National Income Doubling Plan,’ proposed a revision of the seniority-based pay system, advocating for the introduction of job-based pay. Additionally, growing dissatisfaction among younger employees reflected concerns that age- and seniority-based wage determination was inherently unfair (Abegglen 1958, pp. 101-102). Despite these challenges, the Densan wage system continued to expand and solidify.

During the period of high economic growth, the seniority-based pay system extended to blue-collar workers. From the mid-1960s, large enterprises increasingly adopted a system of mass recruitment of new graduates (Oguma 2019, p. 448). This system, unique to Japan, effectively restricted career entry into large enterprises to new graduates, creating a segmented labour market in which an annual cycle of graduate hiring coexisted with the underdevelopment of a conventional mid-career labour market.

By 1966, Tokyo Electric Power Company had introduced a salary system incorporating rank-based elements akin to the civil service pay scale. This system classified all employees into seven ranks, introducing wage differentials. Although rank-based pay appeared to incorporate meritocratic elements, it did not operate as a genuine merit-based system in practice [2]). The labour union advocated for automatic pay increases, and in actual implementation, rank progression was closely correlated with age. In essence, this system reinforced the seniority-based pay system. Shortly thereafter, comprehensive personnel rotation systems were institutionalised across enterprises (Oguma 2019, p. 474), culminating in the full establishment of the Japanese employment system by the late 1960s.

From the late 1970s to the early 1980s, judicial precedents codified the ‘four criteria for dismissal due to redundancy’ (1. Necessity of workforce reduction; 2. Obligation to make efforts to avoid dismissal; 3. Rationality in selection of dismissed employees; 4. Procedural appropriateness of dismissal). Although, in principle, Japanese labour law permits termination with a 30-day notice, these judicial precedents made it practically difficult for large enterprises to implement redundancy dismissals.

In 1991, Japan’s asset bubble collapsed, prompting widespread corporate restructuring. The term risutora is an abbreviation of ‘restructuring’, and became a euphemism for mid-career dismissals in a society where layoffs were considered taboo. During this period, many enterprises faced financial distress, making restructuring efforts an arduous process. Many enterprises subsequently revised their pay systems, and around the year 2000, the adoption of performance-based pay systems became increasingly widespread. While media discourse frequently proclaimed the demise of Japan’s employment model due to globalisation, statistical data indicated that while wage curves had flattened, the seniority-based pay system remained intact (MHLW 2006, p. 227).

During this economic downturn, the proportion of non-regular employment surged from 2003 onward, becoming a major social issue. Notably, in the period following the bubble collapse (1993–2005), enterprises significantly reduced hiring due to economic stagnation. Consequently, an entire cohort of job seekers who graduated during this period struggled to enter the track for regular employment, many of whom were relegated to precarious, non-regular employment. This phenomenon created an ‘Employment Ice Age Generation’ (shūshoku-hyōgaki-sedai), whose members found it increasingly difficult to escape low-wage employment.

In 2016, Prime Minister Abe Shinzō attempted to introduce legal reforms aimed at implementing ‘equal pay for equal work.’ Initially perceived as an effort to reform the Japanese employment system, the policy was subsequently diluted through the legislative process, ultimately accepting the distinction between regular and non-regular employment, thereby undermining its effectiveness. Similarly, the ‘work style reform’ policies introduced under his administration did not address the structuralist issues of the seniority-based pay system.

Thus, Japan’s seniority-based pay system originated in 1946 as a result of labour union demands, solidified into the Japanese employment model by the 1960s, and has persisted despite repeated attempts at reform, economic fluctuations, and social upheavals. This historical trajectory underscores the extent to which social customs have overridden economic rationality in shaping Japan’s labour institutions.

The History of Research on the Seniority-Based Pay System

In economics, the predominant explanation for increases in wages follows Gary Becker’s theory of human capital (1964). This theory posits that firm-specific training enhances workers’ skills and capabilities over time, which in turn leads to wage increases with age. Such training is regarded as an investment, with both the enterprise and the employee sharing the costs; this cost-sharing arrangement subsequently determines wage levels. However, some scholars have pointed out discrepancies in this explanation, such as the observation that ‘the peak of age-based wages in Japan is shifted toward older age groups (up until retirement) compared to other countries’ (Ono 1989, p. 25; translated by the author).

Another significant theory is that of Edward P. Lazear. According to Lazear, under a seniority-based pay profile (Figure 1), younger employees receive wages (W) below their output (V), while older employees receive wages exceeding their output. However, over the course of the employees’ entire career, the total wage payments would match the value of their output. (Lazear 1998, pp. 283-284). If employees are dismissed before reaching the later stage of their career, they lose the expected high wages, which serves as an incentive to remain with the enterprise. This theory also conceptualises seniority-based pay system as an implicit lending and repayment mechanism between employees and enterprises. ‘Workers who are paid less than they are worth when young are lenders. Implicitly, these workers are lending to the firm because they are accepting less than they are producing’ (Lazear 1998, p. 296). Furthermore, this theory elucidates the necessity of mandatory retirement in a seniority-based pay system, as it ensures a balance between the implicit loan and its eventual repayment.

In Japanese business studies, Abegglen, in The Japanese Factory (1958), identified the distinctive characteristics of Japanese corporate employment and management strengths. At the time, Japanese researchers viewed domestic management practices as outdated, but it was a foreign scholar who 'discovered' their significance. Abegglen conceptualised the Japanese management system as comprising three key elements—lifetime employment, seniority-based pay, and enterprise unions—that later gained broad acceptance. While management studies later shifted away from focusing on the Japanese management system, scholars such as Itami Takahiro and Kagono Tadao developed the concept of ‘human-centred management’ (jinpon-shugi). They argued that large Japanese enterprises maintained a long-term employment commitment and bore responsibility for their employees' job security. Based on this perspective, they claimed that ‘the seniority-based pay system is rooted in the principle of livelihood security.’ However, they also emphasised that the Japanese system integrates elements of meritocracy and economic efficiency, leading them to characterise it as a ‘performance-based seniority system’ (Itami & Kagono 1996, 832).

In sociology, Hazama Hiroshi analysed seniority-based pay systems in relation to seniority-based labour relations, corporate familialism, and collectivism. Seniority-based labour relations emerged as a response to the prewar labour market, where skilled workers were in short supply. This system incentivised long-term employment by linking wage increases to tenure. The ideology justifying this system was corporate familialism before the war and collectivism afterward (Hazama 1971). Within this framework, lifetime employment and the seniority-based pay system played a crucial role in fostering employees’ sense of belonging by ensuring their livelihood security.

Japan’s post-bubble economic stagnation triggered a significant shift in the discourse surrounding seniority-based pay and the broader employment system. Oguma Eiji (2019) classified Japanese society into three models: the ‘large enterprise model,’ the ‘local model,’ and the ‘residual model.’ He argued that the Japanese employment system, including seniority-based pay system, is primarily shaped by the ‘large enterprise model,’ which builds the overall societal framework. Oguma traced the historical development of Japanese employment system, demonstrating that it evolved through labour-management interactions under the hegemony of the bureaucratic state.

Labour policy researcher Hamaguchi Keiichiro introduced a distinction between ‘membership-based employment’ and ‘job-based employment’ and described the Japanese employment system as belonging to the former category (Hamaguchi 2021). This was a novel conceptualisation that gained widespread acceptance. Hamaguchi argued that Japan’s employment practices, including the seniority-based pay system and lifetime employment, contribute to disparities between regular and non-regular employees. He advocated for a transition to the globally prevalent job-based employment model.

A review of these studies reveals that most scholars discuss the seniority-based pay system not in isolation but as part of the broader Japanese employment system. However, the terminology and conceptual frameworks used to describe this system have fluctuated over time. It remains unclear whether the seniority-based pay system should be understood primarily as an economic institution or a social construct. The intricate interdependencies among employment practices and surrounding institutions create a complex structure. Uncovering the underlying mechanisms that form this multifaceted domain remains a key task for future inquiry. In the following section, I will present a new perspective through the structuralist theory of exchange.

Seniority-Based Pay System as Exchange

The First Exchange: Intergenerational Gift Exchange

This paper explores the underlying structure of the seniority-based pay system. The discrepancy between an employee’s output and salary, as described by Lazear, benefits employers but offers no inherent advantage to employees. Yet the continued existence of this wage structure in Japan suggests that it is underpinned by an embedded exchange mechanism. To analyse this exchange structure, it is necessary to identify the giver and receiver of the gift, as well as the objects of giving and reciprocation. This paper first examines intergenerational exchange.

In the first type of exchange, the gift takes the form of the output-wage gap identified by Lazear. As previously introduced, Lazear conceptualises the seniority-based pay system as an ‘implicit lending and repayment’ (Lazear 1998, p. 286). Employees receive wages below their productivity when young and above their productivity in middle age and beyond, creating a gap between output and salary. ‘One interpretation is that Japanese workers lend more to their firms than do American workers’ (Lazear 1998, p. 287).

This study reinterprets the gap as a form of gift. Lazear’s explanation follows an individual employee’s salary trajectory from hiring to retirement in a diachronic framework. Viewed synchronically and as a collective act, however, the seniority-based pay system functions as a gift exchange between younger and older employees. The younger cohort receives wages below their productivity, effectively giving part of their productivity to senior employees. When they reach middle age, they, in turn, receive reciprocation from the next generation of younger workers in the form of higher wages. This constitutes an ‘intergenerational gift exchange,’ wherein older employees receive more than their productivity, younger employees support them, and later receive reciprocation from the next generation. The magnitude of this 'invisible gift' reaches its peak at the point of entry into the enterprise and gradually diminishes thereafter. Structurally, employees continue giving until approximately age 40, at which point the gift balance reaches zero. From age 40 onward, they begin receiving reciprocation from the next generation of younger employees.

Beyond this system of gift-giving, a seniority-based pay system incorporates mechanisms of group entry and exit. The structure of the system—entry at age 20 and retirement around 60 or 65—ensures a continuous influx of new participants into the exchange, as older members exit. This generational turnover maintains the continuity of gift exchange.

The exchange-based perspective is not necessarily incompatible with Lazear’s lending-and-repayment model. Viewing the wage gap as a lending and its repayment represents a diachronic perspective, whereas viewing it as a gift exchange represents a synchronic perspective. Since Saussure, structuralism has favoured a synchronic perspective. This paper frames the seniority-based pay system in terms of exchange due to two considerations: (1) the system’s foundational intent of mutual aid, which is inherently synchronic and collective, and (2) its historical durability despite market-driven reforms. At the same time, the structure of exchange coexists with economic rationality at the individual level, thereby aligning with diachronic considerations.

This exchange serves to structure the internal organisation of the enterprise. The first aspect of this structuralisation is egalitarianism. Numerous scholars have pointed out that Japanese enterprises exhibit a strong egalitarian orientation. The characteristics of the Japanese wage system include: (1) a relatively small wage gap between blue-collar and white-collar workers, (2) a narrow wage disparity between managerial and non-managerial employees, and (3) minimal wage differentiation based on educational background (Koike 1981, pp. 71-80). This postwar egalitarianism (Okazaki 1993, p. 6) can be understood as a structural outcome of the gift exchange system. Gift exchange, through reciprocity, functions to equalise participants.

The second aspect of structuralisation is seniority-based hierarchy. The amount of compensation reflects a system of gift-giving and reciprocation, which at a surface level results in hierarchical ranking. Employees rise incrementally in rank each year, a progression that is reflected in promotions. Another key factor is the cumulative total of gifts exchanged. Younger employees accumulate gifts annually, reaching the highest cumulative amount at the midpoint of their career—around the age of 40. After this point, they begin to receive reciprocation, leading to a decline in the cumulative total. Consequently, employees do not continue to gain an increasing advantage simply by virtue of age beyond 40. This structure departs from traditional forms of seniority-based respect; instead, an employee’s status within the enterprise emerges from a complex interplay of elements embedded in the gift exchange system. This paradoxical coexistence of equality and hierarchy is a defining characteristic of postwar Japanese enterprises [3]).

This structure also frequently generates certain forms of age sets. In Japan, employees who enter an enterprise in the same year are referred to as dōki (cohorts), sharing a unique sense of camaraderie. In many large enterprises, new employees undergo a common training program, during which these bonds are formed. After training, they are assigned to different departments, yet they often maintain informal networks across organisational divisions (Nakane 1970, p. 38). Meanwhile, the pay system, which increases in tandem with tenure, gives material form to the seniority-based hierarchy. From a structuralist perspective, the two key features—seniority-based hierarchy and age sets—correspond to syntagmatic and paradigmatic relations (Saussure 1959). Just as phonemes and words are structured within language, individuals are structured through exchange, resulting in distinct forms of social grouping.

Finally, this exchange structure contributes to both group cohesion and exclusivity. Japanese enterprises have often been described as group-oriented, a subject extensively studied in the past. However, discussions of corporate collectivism have waned since the bursting of the economic bubble, likely because large-scale restructuring disrupted the gift exchange system, eroding collective consciousness. Nonetheless, the structural mechanisms underpinning group formation persist. One prominent example is on-the-job training (OJT), a crucial method of employee development in Japan (Koike 1981, p. 36). OJT involves experienced employees mentoring younger workers, imparting knowledge and skills. From an exchange perspective, OJT can be seen as a form of reciprocity for the gifts previously provided by younger employees.

The structuralist basis of corporate collectivism also manifests as exclusivity toward outsiders. There exists a rigid boundary between regular employees and non-regular employees, preventing easy mobility. Even highly competent contract or temporary employees find it difficult to transition into regular employment, reflecting the exclusivity inherent in the exchange system.

The Second Exchange: Redistribution Without a Centre

The second exchange underlies the apparent transaction of wages for labour. While the act of earning wages through labour is generally understood as an economic transaction (market exchange), there exists a deeper form of exchange. While wages are the enterprise’s primary provision to employees, at a more fundamental level, it grants membership in the corporate collective. Abegglen (1958, pp. 65-66) notes that ‘membership in the firm itself is no small part of the worker's recompense.’ This membership typically continues until retirement, effectively constituting lifetime employment. In Japan, new graduates are hired en masse, a process that also functions as an initiation rite for entry into the corporate membership. Wages, as one component of this exchange, function as a form of livelihood security, supplemented by allowances and employee benefits beyond the base salary.

The corresponding counter-gift from employees to the enterprise is difficult to define precisely, but this paper refers to it as 'labour-without-job-descriptions.' In Japan, employment contracts often lack explicit job descriptions, resulting in broadly defined work responsibilities. Employees frequently rotate across different roles and divisions, sometimes involving geographic relocation. This system gives rise to various phenomena: the normalisation of unpaid overtime, reluctance to take paid leave, cases of death from overwork (karōshi), and the common practice of job-related relocation without family (tanshin funin). What has traditionally been labeled 'loyalty' can be reinterpreted as a manifestation of labour-without-job-descriptions. This exchange aligns with the redistribution model: labour contributions from employees are aggregated within the enterprise, which then redistributes wealth and grants membership to its members.

This exchange—redistribution—also structures the relationship between enterprise and employee. The enterprise’s role as the grantor of membership reinforces its superior position, producing a persistent asymmetry in the relationship with its employees. The tendency for Japanese employees to overwork stems from this imbalance. Moreover, this redistribution does not involve direct exchange with the enterprise president; rather, it is mediated through the corporate collective as an autonomous entity (see Figure 2). Consequently, wealth does not concentrate in the hands of the president but instead accumulates within the corporate collective. This implies that the enterprise is not merely a collection of individuals, but an autonomous agent of exchange. Consequently, the enterprise functions as a governing authority, with power manifesting through social interactions within the organisation.

Second, this model implies a decentralised power. In Japanese enterprises, the president's authority is not absolute. Nakane Chie (1970, p. 72) states that the leader is a part of the group organisation. The highest office is typically occupied by the most senior employee, rather than by an externally appointed authority figure, and corporate decision-making tends to be bottom-up, with consensus-building through informal negotiations (nemawashi) playing an important role [4]). Executive compensation is significantly lower compared to that in the United States. These characteristics reflect the structuralist notion of a centreless redistribution process. The governing authority is vested in the corporate collective itself, rather than in a central figure such as a king or chieftain, which is why this system is described as ‘redistribution without a centre.’

Third, the model engenders a dual sense of belonging among employees. Quality control (QC) activities are actively practiced in Japanese enterprises, reflecting the fact that employees think about the whole enterprise, engaging autonomously in problem-solving as if they were managers themselves. Some scholars, such as Itami (1987, pp. 38), describe Japanese enterprises as ‘employee sovereignty’ organisations, emphasising that Japanese workers have a strong sense that ‘the enterprise belongs to everyone.’ Abegglen (1958, p. 70) states that ‘Motivation for work output rests in large part on loyalty and group identification.’ These observations indicate that the exchange structure assigns employees a dual role: they are simultaneously subordinates within the organisation and constituents of its governing entity, insofar as their membership is established through the first exchange. This dual identity enhances motivation for labour.

This model effectively captures the reality of Japanese enterprises. The economic relationship in Japanese enterprises cannot be fully captured by the market logic of labour-for-wages; rather, it is embedded within a deeper structure of gift and counter-gift. The tendency of Japanese enterprises to prioritise long-term growth and stability reflects their deeper function: to maintain and reproduce the structure of exchange.

Consideration of Structuralist Theory

Lévi-Strauss asserted that language is rooted in unconscious thought, and that kinship constitutes a form of language (Lévi-Strauss 1963, p. 34, 47). Similarly, the seniority-based pay system is homologous to language. Although individuals do not consciously perceive the seniority-based pay system as a form of gift exchange, this lack of recognition poses no problem within structuralist theory. The implicit bifurcation of wages—where one component functions as a gift that must be remembered—mirrors linguistic processes in which phonemes are distinguished at an unconscious level and subsequently combined syntagmatically to form words and sentences.

This analysis reveals that the exchange assumes a two-layered structure. Layeredness itself constitutes a structural principle. The interrelations among linguistic layers constitute an elegant 'decomposition-integration' structure. By contrast, the structure of the seniority-based pay system is highly complex. Within the domain of gift exchange, the subjects are differentiated into younger and older employee cohorts of employees, whereas in the domain of redistribution, the exchange occurs between the enterprise and employees. The shifting subjects of exchange and the changing positionality of employees across these two domains introduce structural irregularity. A single act—performing labour and receiving wages—simultaneously enacts two distinct forms of exchange, in addition to the underlying market transaction. In this process, the meanings of wages, labour, and the enterprise emerge in a multilayered fashion—analogous to an anagram. This constitutes the polyphony of structure. Thus, the seniority-based pay system organises persons and collectives across multiple structural layers.

The field in which these exchanges occur marks the transformation of ordinary economic activity into structure—a locus of structuralist genesis—which I term a 'hotspot.' In the case of the seniority pay system, three levels of reality are superimposed across two layers. In the first exchange, the first level of reality is that described by Lazear, where seniority wages function as deferred compensation, while the third level of reality is intergenerational mutual assistance. The second level, situated between these two, is the practice of exchange that transforms the former into structure. In the second exchange, the first level consists of the economic act of generating household income, while the third level pertains to redistribution between the enterprise and the household, with the second level again functioning as the transformative exchange practice. In this way, the Japanese enterprise labour sphere encompasses six overlapping levels of reality, resulting in a highly complex structure. Structuralist analysis provides a methodological approach within the social sciences to delineate and interpret this complexity.

Due to the polyphonic nature of the hotspot, multiple discourses intersect in its interpretation, yet the underlying structure remains unchanged. Dissatisfaction with the system of determining wages based on tenure has been persistent, and arguments frequently arise asserting that seniority wages are unsustainable in an era of economic rationalisation. In response, modifications have been introduced, including the incorporation of performance-based assessments and merit-based pay structures. These surface-level changes have also diminished the salience of concepts such as Japanese loyalty and collectivism. Nevertheless, despite extensive critiques, market-oriented reforms, and shifts in superficial perceptions, the seniority-based pay system is rooted in the fact that exchange unfolds within an unperceived domain, forming a resilient structural foundation. The system endures because it overlaps with Mauss’s three obligations of the gift (Mauss 2002), thereby exerting coercive forces of giving and reciprocation. Consequently, Japanese society remains structurally unchanged at its core.

A comparable case of exchange can be observed in the pension system. Pensions involve setting aside a portion of wages to be withdrawn post-retirement. The Japanese Social Insurance Agency presents public pensions as an intergenerational support mechanism, emphasising social solidarity. Simultaneously, this presents itself as an intergenerational wealth transfer. However, pensions do not constitute an exchange. The pension system lacks the hotspot’s multilayered structure, its polyphonic meanings, its holistic exchange form, and its coercive dynamics. Instead, it remains a fundamentally modern and rational welfare system. Thus, despite their superficial similarities, the seniority-based pay system and the pension system are structurally distinct.

The Impact of Structuralisation through the Exchange

The structure engendered by the seniority-based pay system has exerted a profound influence on Japan’s economic and social systems. Because this form of exchange contradicts market principles and modern ideological frameworks, it produces systemic friction and underlies various socio-economic issues in Japan. This section examines four such issues. Although multiple factors contribute to these issues, the underlying structure of the seniority-based pay system—characterised by long-term reciprocity in the form of gift and counter-gift—plays a central role.

Gender Inequality

Gender inequality remains one of the most pressing social issues in Japan, particularly in the realm of employment. In 2021, female full-time employees earned only 75.2% of what their male counterparts earned. In international comparisons of gender wage gaps, Japan lags more than 10 percentage points behind the OECD average (Gender Equality Bureau, 2021). According to an estimate by Nobuko Nagase, based on the Labour Force Survey conducted by the Ministry of Internal Affairs and Communications, while the median annual salary for male university graduates in their 50s is approximately 8 million yen, the median annual salary for middle-aged female university graduates remains at just 1.7 million yen (Nagase 2024, p. 8).

Within Japanese enterprises, female regular employees have historically been positioned as short-term members, assigned auxiliary duties, and even viewed as potential spouses for male colleagues (Hamaguchi 2021, pp. 230-231). Following the enactment of the 1986 Equal Employment Opportunity Act (EEOA), explicit gender-based discrimination was formally outlawed, thereby theoretically ensuring gender equality. Nevertheless, many enterprises responded by introducing a dual-track employment system, which institutionalised a distinction between ‘management track’ (sōgōshoku) employees, who engage in core business operations, and ‘clerical track’ (ippanshoku) employees, who perform supplementary tasks. The management track entails a steep wage progression, whereas the clerical track is characterised by a relatively flat trajectory. Given that Japanese employment practices generally lack job descriptions, management-track employees are expected to accept geographic mobility as part of their employment conditions, resulting in a gendered division whereby men predominantly occupy management-track positions, while women are largely concentrated in clerical-track roles. As a result, substantive gender inequality persisted despite formal legal prohibitions.

Moreover, the seniority-based pay structure renders career interruptions effectively irreversible. Women who exit the workforce for childcare purposes typically forfeit their career trajectories, leading many to take on unstable forms of employment such as part-time or temporary work. From a structuralist perspective, the exchange structure—assigning men the role of primary agents and women that of supporters—underpins gender inequality. The closed nature of these exchanges further exacerbates the problem. The majority of non-regular employees in Japan are married women, whose lower wages are often justified by the perception that they are not primary breadwinners. Yet this employment structure confines women to subordinate roles within the enterprise and reproduces traditional gender dynamics within the household.　The rigidity of these roles is further entrenched by pension and tax policies that favour a male breadwinner model. Despite policy interventions such as the EEOA, gender inequality persists, sustained by the structural endurance of the seniority-based pay system, which continues to enforce exchange obligations that undermine surface-level reforms. Addressing this inequality requires interventions at the structuralist level rather than superficial policy adjustments.

The Disparity Between Regular and Non-Regular Employment

Following the Koizumi administration’s labour market reforms in 2003, the expansion of non-regular employment became a significant social issue. The long-term stagnation in the economy made it difficult for enterprises to sustain regular employees, and non-regular employment increased, accounting for 38.3% of all employees by 2019 (MHLW 2019, p.1). The wages of non-regular employees are significantly lower, averaging around 70% of regular employees’ wages. However, at the peak of the seniority wage curve (ages 55-59), the wage disparity is even more pronounced, with non-regular employees earning only 56.8% of regular employees’ wages. Moreover, non-regular employment is inherently precarious, thereby exacerbating social inequality. The issue of non-regular employment has been globally recognised as a key factor contributing to social division, encapsulated in the term ‘precariat.’ The division is particularly pronounced in Japan.

The Japanese employment system, particularly within large enterprises, is structured to make dismissals difficult. To maintain employment security for regular employees, enterprises increasingly depend on non-regular workers, whose contracts offer greater flexibility in termination. Regular employees are embedded within the structure, while non-regular employees remain external to it—constituting a structural binary opposition. Beyond differences in remuneration, these two categories of workers have fundamentally different relationships to labour. Regular employees operate within a membership-based framework that demands indefinite commitment to the enterprise, occasionally bordering on corporate servitude. In contrast, non-regular employees operate under market principles, where labour power is commodified and subject to economic rationality. Ironically, it is the regular employees—whose labour is regulated by non-market principles—who engage in an unequal exchange that eschews market-based wage determination, thereby insulating their status from market forces. To maintain this divide, enterprises strictly separate regular and non-regular employees even when they perform the same tasks.

The OECD has repeatedly recommended correcting disparities between regular and non-regular employment. Domestically, some argue that Japanese regular employees are overprotected. However, such disparities remain largely unaddressed. Fundamentally, this issue is one of the structural boundary between ‘inside’ and ‘outside’ within the exchange system, a boundary maintained by the closure of exchange networks. Addressing this issue requires breaking the systemic closure that perpetuates these disparities.

The Employment Ice Age Generation

The cohort that entered the labour market during the prolonged economic stagnation from 1993 to 2004 is referred to as the ‘Employment Ice Age Generation.’ Those who were unable to secure positions at large enterprises upon graduation were often compelled to accept employment at SMEs against their preference, engage in non-regular employment, or remain unemployed. Japan’s labour market operates as a dual system, marked by significant wage disparities between large enterprises and SMEs, and an even more pronounced divide between regular and non-regular employees. Consequently, this generation is statistically characterised by low wages and a high proportion of non-regular employment. Although government support programs have gradually improved employment rates (Genda 2024), wage levels have remained low. There is growing concern that when this generation reaches retirement age, an increase in low-benefit pensioners will pose a serious social issue.

The root cause of the Employment Ice Age Generation lies in Japan's distinctive hiring practice of simultaneous recruitment of new graduates. Because large enterprises primarily hire only fresh graduates, failing to secure employment upon graduation makes subsequent career recovery particularly difficult. While mid-career hiring has gradually increased, the job-switching market remains functionally limited. This rigid practice of simultaneous recruitment offers minimal opportunity for second chances, thereby generating a structural barrier to social mobility. Yet from within the exchange structure, the delineation between insiders and outsiders is vital; structurally, this mode of hiring may be seen as indispensable.

Economic Stagnation

Since the collapse of the asset price bubble, Japan has endured a prolonged period of economic stagnation. As of 2024, Japan ranks fourth in the world in terms of GDP, but its per capita GDP has fallen to 22nd place. While it is difficult to pinpoint a single cause, this section examines the impact of the seniority-based pay system. During the high-growth period of the 1960s, Japanese enterprises hired large cohorts of baby boomers as new graduates, leading to an internal workforce composition heavily skewed toward younger employees. Since younger employees receive lower wages, labour costs remained relatively low, providing enterprises with an economic advantage akin to a demographic dividend. At the structural level, this demographic composition produced a surplus within the system of exchange—one that enterprises were able to capitalise on. By the time of the bubble’s collapse in 1991, the baby boomer cohort had reached middle age. Their wages had risen significantly, as the reciprocation for the ‘gift’ of their earlier labour was now being paid by the younger generation. In an effort to reduce labour costs, enterprises attempted to downsize excess personnel; however, this proved challenging. Large-scale risutora (corporate restructuring) met strong resistance, as it represented a partial breakdown of the exchange system—specifically, a failure to fulfill accumulated obligations of reciprocation. Many enterprises struggled significantly to overcome this challenge. Thus, while the seniority-based pay system functioned advantageously during periods of economic growth, it became a liability during periods of economic decline, contributing to the prolonged stagnation.

Globalisation and technological advancements have accelerated market changes, yet Japanese enterprises have been slow to adapt. This inertia is also influenced by the seniority-based pay system. In Japan, corporate restructuring that involves workforce reductions is typically managed through internal transfers or secondments, with natural attrition serving as the primary mechanism of adjustment. This slow pace of adaptation is a structuralist consequence of the enterprise serving as a field of exchange, with exchange functioning as the fundamental organising principle of enterprise economic activity.

More recently, Japan has faced criticism for lagging in digital transformation. According to the IMD World Digital Competitiveness Ranking 2024, Japan ranks 31st, and the delays in digitalisation within public administration have been particularly noted. The seniority-based pay system proved effective in labour-intensive manufacturing contexts, where human resources were allocable along production lines. However, it is fundamentally ill-suited to the digital economy, where performance is easily quantifiable. In Japan's job environment, where job descriptions are often absent, specialisation is undervalued, resulting in a slow development of digital talent. Furthermore, in most enterprises, digitalisation is pursued primarily for operational efficiency, but its cost-cutting benefits are realised mainly through workforce reductions. Under a system of lifetime employment, however, such gains are difficult to realise, as personnel reductions are structurally constrained. Structurally, digitalisation fails to expand the sphere of exchange, since computers do not participate in reciprocal processes; instead, it contracts the exchange system by reducing the number of human actors involved. Thus, at a deeper level, efficiency itself may not be actively desired. While it is increasingly evident that the seniority-based pay system is misaligned with contemporary economic activities, the fundamental issue is that, despite recognising its shortcomings, change remains elusive.

Among the four issues discussed above, the government and academic institutions have actively proposed solutions for all. Yet, these issues have seen little progress. This lack of progress can be attributed to policies that only address surface-level issues while preserving the seniority-based pay system, which is the root cause of structuralist rigidity. Throughout the prolonged economic downturn since the 1990s, government policies have primarily focused on preserving existing employment structures, such as providing employment adjustment subsidies to prevent layoffs and supporting declining SMEs. However, these measures merely serve to prolong the seniority-based pay system. Meanwhile, labour unions at large enterprises have advocated for employment security, thereby reinforcing the seniority-based system. While such measures enhance the economic security of regular employees in large enterprises, they simultaneously deepen societal divisions. Moreover, beyond the issues discussed above, low wages among younger workers also present a significant problem (Nagase 2024, pp. 11-15). Despite mounting challenges, the structure remains largely intact. What emerges is the durability of the structure. As demonstrated in the preceding discussion, the Japanese employment system is holistic, rendering partial modifications ineffective. However, by understanding structure and actively engaging with it, we may find pathways to societal transformation.

Conclusion

This paper applied Claude Lévi-Strauss’s concept of ‘the exchange of women’ to analyse Japan’s seniority-based pay system as a form of exchange structurally distinct from market principles. It demonstrated that the seniority-based pay system functions not merely as compensation for labour, but as a mechanism for organising social relationships through exchange. Homologous to marriage in kinship structures, the seniority-based pay system operates as an exchange that structures individuals and constitutes collective group formation.

The structural characteristics of this exchange comprise two interrelated layers: ‘intergenerational gift exchange’ and ‘redistribution without a centre.’ The former operates as a gift exchange from younger employees to older employees, establishing both hierarchy and equality among employees of the same cohort. The latter, in which power is neither centralised nor vested in a particular agent, produces a dual affiliation wherein employees function simultaneously as subordinates and, in a sense, as governing subjects.  Japanese enterprises function as groups embedded in a system of exchange, with what has been termed the ‘Japanese management system’ emerging as a consequence of this structural configuration.

The field of exchange constitutes an intersection of overlapping economic and social realities. This paper has conceptualised such a field as a ‘hotspot’ within structuralist theory. Labour and its surrounding institutional structures in Japanese enterprises constitute such a hotspot, wherein pre-linguistic structures emerge, collective formation through structural processes exerts coercive force, and these structures are reproduced through iterative cycles of gift and return. This process serves as a model for social formation.

The seniority-based pay system not only sustains collective formation within Japanese enterprises but also generates contradictions with modern principles, contributing to issues such as gender inequality, disparities between regular and non-regular employment, the Employment Ice Age Generation, and economic stagnation. Addressing these problems requires recognising the seniority-based pay system not simply as a compensation scheme, but as a deeply embedded social structure. It is therefore imperative to critically examine this structure, engage in substantive debate on the advantages and limitations of the seniority-based pay system, and pursue fundamental societal transformation.

Figure 1: Implicit Loans and Honesty (Lazear 1998, p. 288)

Figure 2: Exchange between Membership and Labour-Without-Job-Descriptions (L-W-J-D)

Notes

1.A well-established hypothesis posits that the key institutional elements shaping Japan’s present-day economy were established during the wartime period (Noguchi, 1995; Okazaki, 1993). We argue that postwar exchanges appropriated the employment system originally designed for the wartime controlled economy.

2. Abegglen observed that the job classification system in one Japanese firm is "solely a function of length of service" (Abegglen 1958, p. 89).

3. Nakane, in Japanese Society (1970, p. 39), discusses the concept of vertical order as a characteristic of Japanese society and describes it as a tradition of Japan. At the same time, Nakane points out the coexistence of vertical order and equality. However, as previously mentioned, prewar Japan was not an egalitarian society. The coexistence of vertical order and equality should be understood as a feature of postwar Japan, whereas prewar Japan was characterised by traditional values that emphasised respect for elders.

4. Abegglen (1958, p. 84) notes that in Japan “nearly all decisions are worked out by groups of people in conference and discussion, a necessarily slow and cumbersome procedure”.

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Article copyright Hiroshi Tachibana.

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