Precarious Asia: Global Capitalism and Work in Japan, South Korea, and Indonesia 9781503629837

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PRECARIOUS ASIA

Emerging Frontiers in the Global Economy editor series board

J. P. Singh Arjun Appadurai Manuel Castells Tyler Cowen Christina Davis Judith Goldstein Deirdre McCloskey

series titles Unwitting Architect: German Primacy and the Origins of Neoliberalism Julian Germann, 2021 Revolutionizing World Trade: How Disruptive Technologies Open Opportunities for All Kati Suominen, 2019 Globalization Under and After Socialism: The Evolution of Transnational Capital in Central and Eastern Europe Besnik Pula, 2018 Discreet Power: How the World Economic Forum Shapes Market Agendas Christina Garsten and Adrienne Sörbom, 2018 Making Money: How Taiwanese Industrialists Embraced the Global Economy Gary G. Hamilton and Cheng-shu Kao, 2017 Sweet Talk: Paternalism and Collective Action in North-South Trade Relations J. P. Singh, 2016 Breaking the WTO: How Emerging Powers Disrupted the Neoliberal Project Kristen Hopewell, 2016 Intra-Industry Trade: Cooperation and Conflict in the Global Political Economy Cameron G. Thies and Timothy M. Peterson, 2015

Precarious Asia GLOBAL CAPITALISM AND WORK IN JAPAN, SOUTH KOREA, AND INDONESIA

Arne L. Kalleberg, Kevin Hewison, and Kwang-Yeong Shin

S TA N F O R D U N I V ER S I T Y P R E S S Stanford, California

stanford universit y press Stanford, California ©2022 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press. Printed in the United States of America on acid-free, archival-quality paper Library of Congress Cataloging-in-Publication Data Names: Kalleberg, Arne L., author. | Hewison, Kevin, author. | Shin, Kwang-Yeong, author. Title: Precarious Asia: global capitalism and work in Japan, South Korea, and Indonesia / Arne L. Kalleberg, Kevin Hewison, and Kwang-Yeong Shin. Other titles: Emerging frontiers in the global economy. Description: Stanford, California: Stanford University Press, 2022. | Series: Emerging frontiers in the global economy | Includes bibliographical references and index. Identifiers: lccn 2021016200 (print) | lccn 2021016201 (ebook) | isbn 9781503610255 (cloth) | isbn 9781503629837 (epub) Subjects: lcsh: Precarious employment— Japan. | Precarious employment— Korea (South) | Precarious employment— Indonesia. | Labor market— Japan. | Labor market— Korea (South) | Labor market— Indonesia. Classification: lcc hd5858.j3 k35 2022 (print) | lcc hd5858.j3 (ebook) | ddc 331.25/729095 — dc23 LC record available at https:// lccn.loc.gov/2021016200 LC ebook record available at https:// lccn.loc.gov/2021016201 Cover design: Susan Zucker Cover illustration: Art by Golden Sikorka | shutterstock. Modified inhouse. Typeset by Newgen North America in 10/14 Galliard

Contents

List of Figures and Tables

vii

Acknowledgments

ix

Abbreviations

xiii

Introduction

1

1 Precarious Work in Comparative Perspective

15

2 Japan, South Korea, and Indonesia

35

3 Global Capitalism, Domestic Policies, and Precarious Work

53

4 Dualisms of Precarious Work: Nonstandard Work, Informal Economy, and Self-Employment

73

5 Precarious Work, Wages, and Social Protections

106

6 Precarious Work: Politics and Policies

141

Conclusion

175

Notes

189

References

191

Index

219

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Figures and Tables

Figures 1.1. Conceptual Model

27

3.1. Economic Growth Rates in Japan, South Korea, and Indonesia, 1960–2017

60

4.1

Trends in Types of Nonregular Employees, Japan, 1985–2018

82

4.2. Gender and Nonregular Workers, Japan, 1985–2018

84

4.3. Proportion of Nonregular Employment by Gender and Age, Japan, 2017

85

4.4. Trends in Nonregular Employment, South Korea, 2002–2019

90

4.5. Nonregular Employment by Gender, South Korea, 2002–2018

91

4.6. Proportion of Nonregular Employment by Gender and Age, South Korea, 2016

92

5.1. Monthly Wage Gaps by Gender and Age Between Regular and Nonregular Workers, Japan, 2017

111

5.2. Monthly Wage Gaps by Gender and Age Between Regular and Nonregular Workers, South Korea, 2016

114

5.3. Wage Differential Index, Indonesia, 2015

117

5.4. Percentage of Regular and Nonregular Workers Receiving Each Benefit, Japan, 2003–2014

123

vii

viii

F I G U R E S A N D TA B L E S

5.5. Poverty Rates of Households by Employment Type, South Korea, 2007 and 2017

134

6.1. Politics of Precarious Work

148

6.2. Union Density in Japan, South Korea, Indonesia, 2000–2019

150

Tables 2.1. Population and Employment Data on Japan, South Korea, and Indonesia, 2018

48

2.2. Industrial Composition of the Labor Force in Japan, South Korea, and Indonesia, 1991–2019

50

4.1. Worker Dispatching Act Timeline, Japan, 1985–2018

80

4.2. Gender by Employment Status, Indonesia, 1995–2015

97

4.3. Employment Status in 2005, 2010, and 2015 for Japan and South Korea

102

5.1. Hourly Wage Gap (as Percentage of Regular Male Workers’ Wage) Between Regular and Part-Time Workers by Gender, Japan

111

5.2. Trends in Public Social Expenditures (as Percentage of GDP)

120

5.3. Poverty Rates of Households by Employment Type of Household Head and Spouse, Japan, 2005–2014

132

5.4. Comparison of Nonpoor and Poor, Indonesia, 2017

137

Acknowledgments

precarious work and inequality in Asian countries is a topic that has long occupied our attention. Coming from perspectives grounded in sociology, political economy, and Asian studies, we have found the (neo)liberalization of labor markets and restructuring of work and the economy to be central forces that account for the recent rise of precarious work and growing inequality in this increasingly important area of the world. In this book we present our explanations and research findings on a key topic in the twenty-first century in Asia (and elsewhere): how the structural dynamics in the global economy, in interaction with domestic political and economic forces, have contributed to the rise in precarious work, insecurity, and inequality. The impetus to undertake a comparative study of precarious work in Japan, South Korea, and Indonesia was a grant from the Research Grants for Asian Studies funded by the Asia Center at Seoul National University in 2017– 2018. This book represents the culmination of that project. But our efforts to study this topic originated well before that: in a 2008 workshop on nation-states, global business, and flexible labor sponsored by the Social Science Research Council in Dubai and co-directed by Kevin Hewison and Arne Kalleberg. This was followed up several years later at the University of North Carolina at Chapel Hill, where Hewison was the director of the Carolina Asia Center and Kalleberg was a sociologist working with

HOW INSTITUTIONS SHAPE

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AC K N OW L E D G M E NT S

international programs, which provided some seed funding. This led to an Andrew W. Mellon Foundation Sawyer Seminar for studying precarious work in Asia in 2010 – 2012. We sought collaborators on this project from scholars in various Asian countries, and our first call was to Kwang-Yeong Shin, who was also enthused by the idea of a comparative study of precarious work in Asian countries. The first meeting of the group studying precarious work in Asia was sponsored by and held at Chung-Ang University in Seoul, South Korea, in 2011, followed by meetings in Chapel Hill, sponsored by the Andrew W. Mellon Foundation and the Carolina Asia Center, and in Taipei, supported by the Institute of Sociology at Academia Sinica. The fruits of this group’s study of precarious work were reported in two 2013 issues of the American Behavioral Scientist (“Precarious Work in East Asia” and “Precarious Work in South and Southeast Asia”) and in a book, Policy Responses to Precarious Work in Asia (2015), co-edited by Hsing-Huang Michael Hsiao, Kalleberg, and Hewison. We thank three institutes for providing the data analyzed in this book. The Panel Data Research Center at Keio University, Japan, made available data from the Japan Household Panel Survey (JHPS) and the Keio Household Panel Survey (KHPS). The Korea Labor Institute (KLI), South Korea, allowed us to use the Korea Labor and Income Panel Survey (KLIPS). Badan Pusat Statistik (BPS; Statistics Indonesia) shared with us data from the National Labor Force Survey (sakernas). We also appreciate the help provided by Soo-Yeon Moon, who assembled some of the data we present in the book. Over the many years of its gestation, we have had the support, assistance, and advice of many colleagues, including all those who attended seminars, workshops, and conferences. In Chapel Hill the initial support provided by Dennis Arnold, Joe Bongiovi, and Stephanie Nelson was invaluable. As the project was being completed, we were especially fortunate in being able to persuade several valued colleagues to read and comment on drafts of this book: Charan Bal, Andrew Brown, Heidi Gottfried, Ted Mouw, John Pickles, and the anonymous reviewers for Stanford University Press. We hope we have managed to adequately address at least some of their insightful and helpful comments. We finally thank our editors at Stanford University Press, Steve Edward Catalano and J. P. Singh, for their encouragement and support in the writing of this book. This book is dedicated to those closest to the authors. As much of the writing of the book was conducted in the midst of the COVID-19

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pandemic, more than ever, those in our households had to accommodate numerous Zoom meetings and endless hours of tapping on computers in home offices, interfering with what was “normal” in various degrees of lockdown and isolation. Our gratitude to Sawai Khan-o, Seunghee Ko, and Judith Kalleberg, is immense. Arne L. Kalleberg, Chapel Hill, North Carolina Kevin Hewison, Perth, Australia Kwang- Yeong Shin, Seoul, South Korea

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Abbreviations

ADB ASEAN BPS CSO DPJ EASWM EOI FDI FKTU GDP GPN IIAC ILO IMF ISI JAMSOSTEK JILPT KCTU KLI LDP LMC

Asian Development Bank Association of Southeast Asian Nations Budan Pusat Statistik (Statistics Indonesia) civil society organization Democratic Party of Japan East Asian social welfare model export-oriented industrialization foreign direct investment Federation of Korea Trade Unions gross domestic product global production network Incheon International Airport Corporation International Labour Organization International Monetary Fund import substitution industrialization Jaminan Sosial Tenaga Kerja (Workers’ Social Security) Japan Institute of Labor Policy and Training Korea Confederation of Trade Unions Korea Labor Institute Liberal Democratic Party Labor-Management Council xiii

xiv

A B B R E V I AT I O N S

MHLW NGO OECD OXFAM SCAP SCD SER SMEs TNP2K

UN WTO

Ministry of Health, Labor and Welfare (Japan) non-governmental organization Organisation for Economic Cooperation and Development Oxford Committee for Famine Relief Supreme Command of the Allied Powers Special Committee on Deregulation standard employment relation small and medium-size enterprises Tim Nasional Perceptan Penanggulangan Kemiskinan (National Team for the Acceleration of Poverty Reduction) United Nations World Trade Organization

PRECARIOUS ASIA

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INTRODUCTION

accounts have exposed the difficulties that workers in Japan, South Korea, and Indonesia have had with jobs that are unstable and insecure and that do not provide them with sufficient social protections. In Japan, as precarious work has expanded, so have concerns over “death from overwork,” or karo ¯shi:

RECENT POPULAR AND ACADEMIC

These days . . . part-time workers [in Japan] are increasingly at risk of karo ¯shi. In recent years, firms have been eschewing full-time workers in favor of more flexible arrangements with recruits who work for lower wages, with less job security, which leaves them vulnerable to abuses like unpaid overtime and has forced many to take extra jobs. Since 2015, Japan’s number of workers with two or more jobs has grown by roughly 30 percent. (Hunt 2018)

Overwork is also a concern in South Korea. South Koreans work more hours than people from any other country in the Organisation for Economic Cooperation and Development (OECD) except Mexico. Averaging 38.9 hours a week, they work about nine standard workweeks a year more than workers in the United Kingdom and Australia who have similar average incomes. In response to the negative consequences of such overwork, the South Korean government passed a law on July 1, 2018, that reduced the maximum workweek from 68 to 52 hours. For many, reduced hours also meant reduced wages, forcing some to take second or third jobs, often with irregular hours and huge pressure: 1

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There have been 15 deaths among couriers so far [in 2020], including some who died after complaining of unbearable workloads that kept them on the clock from dawn until past midnight. The delivery workers say they’re dying of “gwarosa,” or death by overwork. . . . “The workload has become just too much,” Ms. Choi [Ji-na, one of the couriers] said. “Since the coronavirus came, going home early enough to have dinner with my children has become a distant dream.” (Choe 2020)

And in Indonesia, the largest digital economy in Southeast Asia, “gig workers” engage in new and precarious forms of work. This work is not always rewarding, with workers struggling to maintain families: Home health services worker: “I have sold nearly all my belongings to meet my household’s needs. There is no work and we are struggling to pay rent.” House cleaner: “I can only afford 1– 2 meals per day now. We used to eat meat, but we cannot afford it anymore.” (Flourish Ventures 2020: 5, 6)

Such situations illustrate some of the important consequences of the dynamics of global capitalism in recent years for workers in the three countries we study in this book: Japan, South Korea, and Indonesia. As in economies across the globe, the economic, political, and social consequences of neoliberal policy in these countries have led to the entrenching of precarious work, or work that is uncertain, unstable, and insecure and in which employees bear the risks of work (as opposed to businesses or the government). These workers receive limited social benefits and statutory entitlements (Kalleberg and Hewison 2013). Precarious work encompasses nonregular work arrangements (e.g., temporary and part-time workers and independent contractors) as well as work in the informal economy, which generally does not have the same legal and social protections as regular work. Moreover, the social protections previously available to workers in standard (or “regular,” full-time, or “permanent”) employment have declined, creating more precarious work among regular employees too. These protections and benefits were provided both by employers, as part of the standard employment contract, and by governments, as part of the social welfare system. In all three countries, these changes are significantly gendered, with women being particularly vulnerable to the changes. In Japan and South Korea social protections have been changed and, in some

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cases, reduced. In Indonesia they were extended following the overthrow of the New Order regime in 1998 but have been limited and challenged by both the state and business interests. The recent expansion of forms of precarious work is the core problematic of this book. We examine the political and economic dynamics that underlie the liberalization of employment and social protections in Asia. We present a nuanced account of how precarious work is an outcome of political contestations in which the state, multinational corporations, local business, trade unions, and civil society organizations (CSOs) struggle to shape employment systems in Japan, South Korea, and Indonesia. We conceptualize and provide evidence for how these countries compare with respect to the rise of precarious work and how they differ in their institutions and politics with regard to worker power. We also examine the consequences of these political-economic dynamics for economic inequalities and for workers holding precarious jobs. Our central theoretical argument is that the extent and consequences of precarious work reflect the relative strengths or weaknesses of transnational and domestic capital and labor in particular sectors of the economy in Japan, South Korea, and Indonesia, acknowledging that these forces have ebbed and flowed over time. Similarly, the social protections available to those in different work arrangements vary according to the governments’ economic, social, and political policies, which emphasize the relative importance of markets, fiscal discipline, trade, investment and liberalization (e.g., financial deregulation, decentralization, privatization), and the role allocated to the state. A range of policies have resulted, including limited state protections and welfare, decentralized labor relations, the weakening of unions and collective bargaining, and fiscal discipline taking precedence over social policies. We summarize the political and economic forces that led to precarious work using the concept of neoliberalism. Neoliberalism is a set of ideological commitments and practices that have shaped the responses of governments to changes in global capitalism, such as greater globalization and technological transformation. In Japan, South Korea, and Indonesia the process of neoliberal globalization has intensified downward pressures on working conditions, enhanced capital mobility, weakened organized labor and limited the protections for workers, and generated entrenched economic inequality. Neoliberalism has played out in different ways in the three countries, depending on their balance of class forces, unique

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histories, demographics (especially their gender and age configurations), and social norms and cultures. Institutions are important. We see institutions as the “social facts” that are external to individuals and coerce their behavior through social control and sanctions (Durkheim 1982). Institutions are durable and reproduce themselves over time (Clemens and Cook 1999). Nevertheless, they can be changed through collective actions, such as power struggles between capital and labor. We focus mainly on labor or work institutions; they set the rules, which many people agreed to, and thus legitimated, for longer or shorter periods, as effective means of solving the economic and political problems of production and distribution. They represent the hierarchical orderings of individuals and clusters of interests, the configurations of norms, and the rights and obligations that characterize the different types of actors in the economy. They describe the ways in which labor is divided, tasks are allocated, and authority is distributed (see Kalleberg and Berg 1987: 2). We bring together two theoretical approaches that are usually kept separate to explain how institutions in Japan, South Korea, and Indonesia affect the incidence and consequences of precarious work. Our analysis integrates a historical institutionalist approach that sees institutions, once established at a critical juncture, as shaping behaviors in the broader society. At the same time, using insights from a critical political economy approach, we emphasize that institutions have their own histories and emerge from particular social and political struggles, especially those between capital and labor. Our synthesis of these two approaches takes particular care to show how institutions reflect power dynamics influenced by industrialization, democratization, and globalization in Asia. The political economy approach places greater emphasis on how features of the global capitalist division of labor influence power dynamics within countries and impact domestic institutions. These country-level institutions, in turn, are not static. In particular circumstances they can acquire considerable independence and affect the nature and structure of work and inequality. In this sense, these two theoretical approaches are complementary: The political economy approach explains the transnational and domestic forces and contests that shape particular institutions within countries, and historical institutionalist theories explain how these institutions structure precarious work and its outcomes. Our theoretical perspective challenges mainstream economic explanations that view economic development and neoliberal-influenced policy

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as being primarily the consequences of market forces and that generally disregard or downplay the roles of political and social factors. In this mainstream view, political actions are imperfections in labor markets and institutions do not have significant influences on labor market outcomes. Rather, these outcomes reflect changes in skills, technology, and productivity, among other things (see D. R. Howell and Kalleberg 2019). Economists who hold this view might explain the rise of nonregular work arrangements as reflecting the preferences of individuals, such as women wanting to work part-time or on a temporary basis to deal with the needs of their families. Mainstream economists might also consider situations in which growth in international competition leads to employers having less capacity to secure their profits using standard work arrangements (with fixed costs and, in some cases, employment security guarantees and benefits) and therefore turning to more flexible arrangements. The kinds of questions we ask tend to be different from those posed by mainstream economists who study work and inequality. For example, they focus more on how individuals acquire particular skills and get sorted into positions and less on how inequalities associated with the structure of the positions themselves are problematized. People and jobs are of course interdependent, though we emphasize institutional factors and jobs, whereas most economists concentrate more on the supply side of the labor market and individuals’ characteristics. Why Study Precarious Work in Asia? Asia— a region that encompasses an area of 17 million square miles and is home to 4.5 billion people, or nearly three-fifths of the world’s total population— is an important site of capitalist development. Today, Asia is the world’s factory. UN statistics for 2018 tell us that Asian economies then accounted for 37.2% of global gross domestic product (GDP) and more than 52% of manufacturing’s value-added (United Nations, Statistics Division 2019). Apart from the period of economic crisis in the 1990s, Asia has witnessed remarkable economic growth since World War II. Changes in Asia are directly connected to changes in patterns of investment, production, trade, and forms of consumption in the United States, Western Europe, and the rest of the world, mediated by globe-girdling value chains and the arrangements of work within them. Among so many other lessons, the global COVID-19 pandemic demonstrates how much global value chains depend on production in Asia. Because so much industrial production is

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located in Asia, changes in work practices there inevitably affect decisions everywhere regarding production, welfare, and incomes. In other words, changes in configurations of work and production in Asia are intimately linked to global changes, including the expansion of precarious work in the United States and other developed countries. This shift of production and the associated costs make for competitive pressures at every node in global production chains and networks. Why Japan, South Korea, and Indonesia?

Comparative studies— in this book, of Japan, South Korea, and Indonesia—permit the examination of particular issues and institutions in different sociocultural and political economic settings using an essentially similar array of research methods, international and national level data, and an extensive analysis of the existing literature. Our aim is to understand the similarities and differences for the insights they can provide into precarious work in different national contexts and to suggest some generalizable conclusions from the three cases (Hantrais 1995). Japan, South Korea, and Indonesia provide a useful lens by which to assess the roles of global and domestic factors in shaping precarious work and its outcomes since about 1945. The three countries represent a range of Asian economies: Japan and South Korea are now developed and quite mature economies, whereas Indonesia is a large economy measured in terms of GDP, but it remains classified as a middle-income country. All three countries are political democracies and capitalist economies, which allows a comparative assessment of their economies (markets, corporations, trade) and democratic politics (parties, parliaments, civil society). Japan was the third largest economy in the world in 2019 with a GDP of $5.15 trillion, according to the International Monetary Fund (IMF). South Korea ranked twelfth ($1.63 trillion), and Indonesia ranked sixteenth ($1.11 trillion). Combined, the three economies account for more than 9% of global GDP and about 13% of global industrial production. Japan, South Korea, and Indonesia differ in their level or stage of economic development, historical trajectories of industrial transformation, and configurations of labor politics. In politics, Japan’s democratic development came out of war and an American-administered political transition that led to the transformation of the country into one of the most stable political systems in the region. In South Korea and Indonesia, civilian uprisings led to the decline of military-dominated authoritarianism. Each country has

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responded to the dynamics of global capitalism in particular ways, with variations in how they have responded to transnational pressures and their effect on domestic political economies. Post–World War II economic transformations began with Japan, enveloped the “East Asian Tigers,” including South Korea, and then extended to economies with more recent development experiences, including Indonesia. All three countries have undergone periods of high-speed growth, with Japan the first to industrialize in an era when strong national states had considerable capacity to make and implement decisions regarding domestic institutions and foreign policy. Japan’s dirigiste industrial policies enabled some companies to dominate their industries and develop into global corporations and brands. South Korea was the next to industrialize, and, though it also adopted dirigiste policies and had considerable state capacity, it was somewhat more constrained by global forces, responding to industrial relocation and the search for cheap labor manufacturing in a new international division of labor (Fröbel et al. 1978). Indonesia, the last to industrialize, was the least able to develop state capacity; a larger proportion of its companies were linked to global firms and foreign investment, and it was more reliant on demands from global supply chains, including those initiated by Japanese and Korean corporations. In all three countries, social protections have not been well developed; they rely on employer-centered programs, exacerbating marginalized workers’ precarity and contributing to inequality. Although the strength of the state has changed over time and is different in the three countries, the state has had a pivotal role in shaping economic transformation in each country and thus has contributed to the variegated precarity of its workers. Each of the three study countries is an electoral democracy, yet they differ in their regulatory regimes, location in global production, class structure, and historical trajectory. This inevitably means that the dynamics of precarious work also differ in each country. In Japan and South Korea the rise in precarious labor is reflected in a growing distinction between employees in “standard” employment relationships and those with “nonstandard” work arrangements (see Sangheon Lee and Eyraud 2008). In Japan and Korea it is “nonregular” employment that has expanded, with women’s employment especially affected. In Indonesia precarious work is often understood as employment without a contract; it is extensive in the informal sector and in agriculture. In each of these jurisdictions and despite their differing definitions of precarious work, the work captured by

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these terms is uncertain, unstable, and insecure and the employees bear the risks of work and receive limited benefits. A Note on Statistics

Contemporary comparative research increasingly relies on global, regional, and cross-national data sets that were created to allow quantitative analysis involving statistical manipulation to test hypotheses. In comparative politics this method has become the dominant mode of analysis (Schedler and Mudd 2010: 429). Although such an analysis can indicate broad outcomes across countries, often the texture of country-level difference is left untested. In this book we conduct a comparative analysis using primary data drawn from existing international and national databases. These data are not used to test hypotheses but to illustrate and highlight cross-national similarities and differences. In addition, we use statistical and qualitative data that allow a fine-grained analysis of precarious work in Japan, South Korea, and Indonesia. We acknowledge that some of the quantitative data are problematic. International data sets such as those from the OECD, the International Labor Organization (ILO), and the World Bank are usually based on national data supplied by governments, and although the basic items are comparable, when national data are considered, differences in definition emerge. In general, we have found that Japan and South Korea have data that are most readily compared, although definitions sometimes diverge. Indonesia’s national data show considerable divergence from the other two countries. Yet this difference remains useful for the detailed analysis of Indonesia. In the following chapters, where appropriate, we flag the differences in definitions and data. In much of the literature on precarious work, including ILO discussions, and in national statistics, the most commonly used term is nonstandard work, a term that we use interchangeably with nonregular work. Standard work (which we use synonymously with regular work) can also be precarious if it is uncertain, unstable, and insecure. We discuss this further in Chapter 1. Inequality and Poverty As we show in the chapters that follow, precarious work has had important social and economic effects in Japan, South Korea, and Indonesia and is contributing to the increasingly high level of inequality that is condemning some segments of the population to chronic poverty and many

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more to livelihood and income vulnerability. On a related note, low wages, flexibilization, casualization, and informalization are shaping Asian labor forces and limiting lifestyle choices and opportunities. The resulting job insecurity restrains demands for higher pay and benefits and keeps costs down and “global competitiveness” up; flexibilization, casualization, and informalization have been used to discipline labor and curtail collective organization, minimize legal protections, and limit welfare. For example, over the past three decades Japan has changed from a relatively equal society to a “gap society” (Tachibanaki 2006). Kitao and Yamada (2019) have shown that inequality in earnings, income, and wealth all increased since the 1990s, driven by a relentless offshoring of Japanese manufacturing and the resulting shift to employment in the service sector. The result has been a pauperization of peripheral groups— such as older one-person households, nonregular workers’ families, and single-mother households— because marginalized social groups have been employed in a variety of nonregular work arrangements and economic security has been reduced for increasing numbers in the labor force (Moriguchi 2017). Wider repercussions have also resulted, as many young people are marginalized as nonregular workers and delay or avoid marriage and family formation, exacerbating the already low fertility rate. This means that government social policies that tend to rely on a supportive family (which was formerly the de facto welfare system) are at odds with emerging social realities. With low wages and limited social support, the working poor are becoming entrenched. South Korea has demonstrated a similar trend of growing inequality since the 1990s (Cheon 2016; K.-Y. Shin 2013). The sharp increases in both income inequality and the relative poverty rate were consequences of economic liberalization in the early 1990s and the impact of the 1997– 1998 economic crisis, which saw increased unemployment and more rapid liberalization, including much debated changes to employment relations and welfare reform in the mid-2000s. These debates were double-edged: The conservative government led the economy into the turmoil of the crisis, and the National Congress for New Politics, the new ruling party that took power in 1998 as the economy crashed, did not fully recognize the problems of neoliberal globalization and followed the guidance given by the IMF. The new democratic government sought to simultaneously embed democratic politics and abolish the authoritarian developmental state’s legacy and revive the economy. However, in exceptionally difficult

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economic circumstances, it was forced to ask the IMF for a rescue fund, acceding to the IMF’s conditions without adequately considering the impact of the economic reforms that the IMF demanded. Inequality in Indonesia has also grown rapidly over the last two decades (World Bank 2016). This has coincided with declines in contributions to value-added goods from manufacturing and agriculture and increases in services. By 2014 inequality in Indonesia had reached its historically highest level: The Gini index increased from 0.30 in 2000 to 0.41 in 2014, higher than most of Indonesia’s East Asian neighbors, despite the fact that the World Bank (2016: 7) considered this rate an underestimate. The Oxford Committee for Famine Relief (OXFAM) observed, “Today, the four richest men in Indonesia have more wealth than the combined total of the poorest 100 million people” (Gibson 2017: 1). Poverty has declined, but this is based on an unrealistically low poverty line, and despite almost three decades of high economic growth rates, almost 40% of Indonesians remain poor or vulnerable to poverty (World Bank 2016: 8). As already observed, precarious work is not unique to East and Southeast Asia. Work that is uncertain and insecure and in which the risks are shifted from governments and employers to workers now characterizes all economies, including advanced capitalist countries. And informal economies— and their precarious work— dominate much of the late developing world. Although the basic nature of precarious work does not vary a great deal, what does differ are the global dynamics that interact with the local conditions, such as regulatory environment, level of industrialization, and the relative power of capital and labor. Neoliberalism and global capitalism have had differential effects on labor markets and the structure of work in the three study countries because of their distinct social, economic, and political dynamics. We argue in this book that differences in levels and forms of precarious work result from differences in the relative power of capital and labor. Similarly, state regulation, reregulation, or the lack of regulation varies according to the capacity of the state and the nature of its political regime. The growth in precarious work in Japan, Korea, and Indonesia illustrates these differing dynamics. Much of the increase in precarious work in Japan is due to firms’ adoption of cost-cutting policies beginning in the mid-1980s in response to heightened competition associated with globalization, the deregulation of labor markets, and the loosening of restrictions on firms’ use of nonregular workers as well as state provision of

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social insurance benefits only for regular workers. In South Korea a drastic increase in precarious workers was an immediate consequence of neoliberal economic reforms implemented by a new democratically elected government after the 1997– 1998 economic crisis. These reforms included the enhancement of flexibility of the labor market, the privatization of public corporations, and the restructuring of the financial market after the financial crisis. For Indonesia precarious work is also a consequence of neoliberal reforms implemented by the new democratically elected government; deregulation (or, more accurately, reregulation) of labor and markets has been part of the processes of democratization and decentralization that have seen the state adopt liberalizing policies meant to expand employment while also promoting “labor flexibility.” Overview of the Book This book adds to the growing scholarship about how political, economic, and social institutions affect precarious work, labor market outcomes, and inequality in Asia. Extant research typically makes trade-offs between specificity and generality. Some studies of precarious work and its consequences have tended to focus on one country and thus have been unable to assess how differences in a variety of macrolevel structures and institutions affect these processes. Other studies compare a relatively large number of countries, often using typologies that tend to gloss over important differences between countries within a given type of employment or welfare regime. Our approach, by contrast, considers three countries in Asia that differ in their institutions and political processes in important ways. This strategy enables us to drill down on the features that might be distinctive to these countries. By combining in-depth discussions of the political and labor market contexts of these countries with quantitative empirical information on the extent of precarious work, we can better understand the variability in precarious work and its consequences in these countries. Our perspective is multidisciplinary, drawing on insights from sociology, political science, economics, political economy, history, public policy, and Asian studies, among other fields. We also adopt a multilevel approach, linking macrostructural institutions and policies to mesostructural features of employment relations and microstructural outcomes for individuals and their families. The combination of these interdisciplinary and multilevel features enables us to better understand the interplay among the political, economic, and social forces that generate precarious work and its negative

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consequences. In sum, our book is distinctive in its comparative (looking at three democratic countries that differ in important ways), multilevel (examining societal processes and their impacts on individuals), and interdisciplinary (drawing especially on sociology, political science, and economics) approach to a significant outcome of the expansion of the global economy (precarious work and its consequences for inequality). We also seek to integrate the historical institutionalist and political economy approaches to understand the role of institutions in these countries that produced these outcomes. By comparing three cases, we also indicate the variegated nature of precarious work in Asia, showing that the formation and variation of precarious work in the region can be considered an outcome of the interplay of global economic transformations, national political transitions, and local labor politics. The book is organized around a set of themes, such as the comparative study of precarious work, how precarious work results from the interplay between global capitalism and domestic policies, the incidence and trends of types of precarious work, the impacts of precarious work on inequality and poverty, and labor politics. In each chapter we provide a comparative analysis of the three countries. We believe that this organization— as opposed to presenting each country in a separate chapter— enables us to better highlight the similarities and differences between these countries. In Chapter 1 we present our conceptualization of precarious work and how this represents a departure (at least in Japan and South Korea) from the standard employment arrangements associated with their periods of Fordism. We outline various forms of precarious work, including nonregular work, informal economy work, and self-employment. We present the conceptual model that guides our analysis in the book and discuss how our framework seeks to integrate historical institutionalist and political economy explanations of institutions. In Chapter 2 we offer an overview of the three countries included in this study: Japan, South Korea, and Indonesia. We briefly summarize the key features of these countries’ economic, social, and political institutions since the 1970s and illustrate how these reflect our theoretical arguments regarding these institutions outlined in Chapter 1. We also present information on these countries’ demographic and industrial characteristics. The ways in which global and domestic factors have intersected to produce the growth of precarious work and inequality in the three study countries are discussed in Chapter 3. We first identify the exogenous

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factors associated with the global economy (such as neoliberalization and the dynamics of global capitalism, and the processes of hyperglobalization, production, and investment) and the endogenous factors associated with the political, economic, and social forces in each of the three countries. We discuss how the dynamics of global capital in East and Southeast Asia have interacted with the economic, political, and social institutions in Japan, South Korea, and Indonesia to create nonregular work arrangements and to generally shift risks of employment from the government and employers to individuals. In Chapter 4 we document the growth in nonregular work arrangements in Japan and South Korea and the salience of the informal economy in Indonesia. We present data on work arrangements (and trends in them) in the three countries (nonregular versus regular work especially in Japan and South Korea; informal versus formal work in Indonesia). For Japan a key trend is the expansion of nonregular work, especially for males. In South Korea the large self-employed sector (the majority of which does not have employees) is especially important. We also compare Japan and South Korea with respect to the differing opportunities that men and women who work in nonregular jobs have of moving to regular jobs. For Indonesia we present data on the formal versus informal economy, showing how the latter has remained significant, and explain how nonregular work remains important even in the so-called formal economy. We discuss the relationship between nonregular work arrangements and labor market outcomes, such as wages and broader inequalities and poverty, including those associated with both the availability of and access to social protections (e.g., health insurance, pension benefits, unemployment insurance, and training), in Chapter 5. We present data on the wage gaps between nonregular and regular workers in Japan and South Korea and how these differ by gender and discuss the especially disadvantaged position of self-employed people in South Korea. We also consider the wage gaps among employees, own-account workers, and other informal workers in Indonesia. We then present data on poverty in each country, showing whenever possible how the poverty rate differs by work arrangement. We explain wage gaps between nonregular and regular workers through a comparison of labor market institutions and social welfare protections. We emphasize the macrostructural factors that shape labor market institutions (especially unions and collective bargaining and minimum wage laws) and social protections (health insurance, retirement and

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pension benefits, unemployment insurance benefits, and labor laws such as those related to occupational safety and health) as well as the political factors that affected them. In Chapter 6 we discuss labor politics in the three study countries. We emphasize the responses of labor, civil society, and governments to precarious work, inequality, and poverty. These include bottom-up social and political movements that have sought to mitigate the most serious negative consequences for workers and their families, and top-down efforts by governments (perhaps prodded by protest movements) to enact policies (such as more generous welfare policies) to protect workers from the consequences of precarious work. In our concluding chapter we summarize our findings about precarious work in Japan, South Korea, and Indonesia and their implications for current and future issues. Our argument and the evidence we present to support it suggest the need for comprehensive social protections to help people cope with the risks presented by the increase in precarious work. The necessity for social protections is widely recognized, as indicated even in recent reports from the World Bank (e.g., 2016), whose views are largely shaped by neoliberal economic theories. However, although there is agreement on the outcomes that are needed, there is less consensus on how to achieve them, prompting important policy debates. This view of the World Bank focuses its policy prescriptions on providing individuals with greater opportunities to achieve in an unequal society rather than on directly addressing class-generated differences and inequalities. By contrast, we argue that there needs to be class-based redistribution of income and wealth to reduce the inequality between nonregular and regular workers. Such a change would require a broad redistribution of political power.

CHAPTER 1

Precarious Work in Comparative Perspective

our general conceptualization of precarious work, its antecedents, and its consequences. As such, we set the stage for our subsequent discussions of the sources and outcomes of precarious work in Japan, South Korea, and Indonesia. The point of departure is the notion of a standard or regular employment relationship that characterized especially developed industrial countries such as Japan and South Korea in the post–World War II era. This work arrangement is associated with the Fordism of the West and was a basis for the development of the welfare system in that period. We then elaborate on our view of precarious work as representing departures from this ideal typical work relationship. Finally, we sketch the conceptual framework that guides our analyses and arguments in subsequent chapters.

IN THIS

CHAPTER WE

OUTLINE

Fordism, Standard Work, and Social Welfare In the industrialized countries of the West, the brief period from the end of World War II to about the mid-1970s was one of relatively high economic growth. This growth was accompanied by an advancement of welfare regimes that provided a considerable measure of economic security for significant groups of the population. The production system in this period in the industrialized economies has been identified as a Fordist production regime. Fordism centered on assembly-line manufacturing, which produced standardized, relatively affordable goods and paid workers wages 15

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that permitted consumption sufficient for the development and maintenance of a consumer society. Underpinning Fordism was the technological progress associated with mass production that increased productivity through economies of scale (Neilson and Rossiter 2008: 57). The period saw inequality decline, unemployment remain relatively low, and the middle class expand. This “golden age” for some workers in the West, especially white men, was based on a mediation of the capital-organized labor relationship by the state that, alongside relatively strong unions and a willingness for industrial action, transformed the more brutal Fordism of earlier decades (Gambino 2007: 40). At the same time, though, Fordist production systems sustained a deskilling and homogenization of the labor force under Taylorist management systems that also disciplined labor (Clarke 1999: 4).1 The normative employment relationship of this period, gained through workplace and political struggle, was standard work, meaning permanent, full-time work directed by an employer at the employer’s place of business and with regular pay and benefits. Beyond the workplace, social benefits such as education, health services, and welfare were usually the responsibility of the state. The viability of these arrangements was facilitated by the economic growth of national capitalism, the relatively young labor forces in the postwar period, and the extension of social-democratic political systems in the West. The standard work relationship was mainly limited to male employees, because workplaces were able to function in large part because of a “male breadwinner– female housekeeper” model in an era of relatively stable families and high fertility rates (see Vosko 2010; EspingAndersen 1999). This model of the employment relationship was the basis of labor laws and regulations that offered workers some protections from unfair and unsafe labor conditions. The standard employment relationship (SER) was also the foundation for the distribution of worker benefits and many social protections. Three major institutional mechanisms provide social reproduction and social protection: states (through public expenditures), employers (through provision of benefits), and families (through dual earners or familial support). The form and scope of these systems differ considerably depending on a country’s institutional, political, and cultural features. In his study of advanced (Western) capitalist democracies, Esping-Andersen (1990) identified “three worlds of welfare capitalism,” or three diverse models of welfare regimes, that were consolidated in the 1960s and 1970s

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and provided varying strengths of protection against social risks. He based his classification of these worlds on three indexes: decommodification (the extent to which an individual’s welfare relies on the market), social stratification (the role of states in determining social stratification outcomes), and the private-public mix (the relative roles of the state, the family, the voluntary sector, and the market in welfare provision). Based on these indexes, Esping-Andersen (1990) identified three regime types. The first was a social-democratic model (as in Scandinavian countries), which was characterized by centralized and coordinated bargaining and comprehensive, universalistic welfare states. This model involved the state’s commitment to full employment and income protection, with an interventionist state promoting redistribution. The second type of regime was a conservative continental European model (as in Austria or Germany), typified by narrower communities of social citizenship (often based on occupations) and a stronger link between family, benefits, and employment; in this system existing social patterns tended to be maintained. The redistributive impact in these countries was minimal. The final regime type was a liberal, Anglo-Saxon model (as in the United States and the United Kingdom), exemplified by relatively modest public benefits and rights and more extensive private advantages enjoyed by those in the core unionized sectors of the economy (Esping-Andersen 1999). The productivist or East Asian social welfare model (EASWM) has been proposed as a fourth “world” of welfare capitalism (Holliday 2000). The EASWM is represented by Japan, South Korea, and Taiwan and is associated with the “developmental” state. A key feature of the model is that social policies (including social protections) are subordinated to— and designed to facilitate— economic development and growth. Social rights to welfare are relatively limited and are connected to productivity increases and thus reinforce the productive elements in the society (Holliday 2000); hence those in the favored “core” manufacturing industries in Japan or South Korea receive substantial benefits from their employers (including assurances of “lifetime” employment), whereas those outside the core employment system are forced to depend on other sources of protection, such as the family or community. There is little decommodification in the EASWM, because social protections and standards of living are heavily dependent on one’s labor market position. According to Holliday, the two defining characteristics of the EASWM of welfare capitalism are

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a growth-oriented state and subordination of all aspects of state policy, including social policy, to economic/industrial objectives. . . . Everything else flows from this: minimal social rights with extensions linked to productive activity, reinforcement of the position of productive elements in society, and state-market-family relationships directed towards growth. (Holliday 2000: 708 – 9)

Taking Esping-Andersen’s definitions of social rights, stratification, and state-market-family relations further, Holliday distinguishes three variations of the productivist world of welfare capitalism. He identifies Japan as “developmental-universalist,” whereby some social rights are extended to productive groups of the population but there are some universal social programs. Singapore is identified as “developmental-particularist,” where social rights are minimal but productive elements of society obtain some welfare provisions. Last, Hong Kong is defined as “facilitative,” in which social rights are minimal and the market is prioritized (Holliday 2000: 710). All four forms of welfare capitalism are based, to varying degrees, on the idea of the SER. Those who are employed in the core sectors of the economy make contributions to social insurance funds, especially in continental Europe, in countries following the EASWM, and in liberal market economies such as the United States that rely heavily on employer provisions of welfare benefits. The viability of the SER and the associated welfare regimes are facilitated by the segmentation of the liberal and conservative welfare regimes into protected insider groups that are part of the SER and outsider groups that are excluded from it, a pattern also seen in Japan and other East Asian economies. In continental European countries such as France and Germany and in southern European countries such as Italy and Spain, welfare schemes provide employment protections for insiders, whereas outsiders are exposed to precarious work. In the EASWM countries, benefits are generally narrow and are often limited to state officials or to workers in the organized, formal modern industrial sector (Kwon 2007: 2). Mired in the economic and political crises of the late 1960s and early 1970s, Fordist political arrangements in the West unraveled in what James O’Connor (1973) identified as a fiscal crisis of the state, which was marked by an inability to deliver economic growth and profits while maintaining social benefits and public goods. Capital in the West sought to bolster

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profits and throw off the chains of regulation and the limitations of collective labor arrangements by abandoning political Fordism and embracing internationalized production, seeking cheap and unorganized labor relations in developing countries while mounting a political and ideological campaign against Keynesian liberalism (Antonio and Bonanno 2000). The success of capital’s political agenda was reflected in the rise of Margaret Thatcher in Britain and Ronald Reagan in the United States. Conceptualizing Precarious Work A few years ago, philosopher Slavoj Žižek (2012: 9) observed that in the contemporary world “the chance to be exploited in a long-term job is now experienced as a privilege.” His ironic reflection on the global phenomenon refers to the fact that, for many, employment has become increasingly unstable, uncertain, and insecure. This uncertainty also characterizes those who want to work or who must work, cycling in and out of jobs, family work, self-employment (especially those without employees, sometimes referred to as own-account workers), and unemployment. Politicians, the media, and academics refer to employment arrangements where the risk is shifted from employers to workers as precarious work, the gig economy, the platform economy, and zero-hours contracting. In some countries such shifts in work relationships have coincided with reductions in state benefits and statutory entitlements in an era of neoliberalization (Vosko 2010: 2). Even in economies where unemployment had fallen to record lows before the COVID-19 pandemic, precarious forms of work have become an essential element of work. Often, the multiple changes associated with precarious work are considered mostly a Western phenomenon, reflecting the end of Fordism and the demise of standard work. Outside the West workers are often considered to have long suffered unstable, uncertain, and insecure work, family work, self-employment, and unemployment, just as workers in the West did before 1945 and outside core production in large firms. In fact, though, over a period beginning in the 1970s, the offshoring of production to economies with lower wages, associated with the rise of global value chains, and technological and logistics innovations made precarious work a global phenomenon. Profound changes to the relationships between work, workers, employers, and the state have greatly transformed the ways that risks are experienced by workers, their families, and communities (see Beck 2000; Webster et al. 2008; Kalleberg 2009, 2018). Such

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changes are politically challenging. For example, the destabilizing populist wave of recent years has featured numerous political shibboleths lamenting changes to work, employment, and rising insecurity that blame exploitative elites and the policy and political dominance of neoliberalism (Rodrik 2011; Steinmetz-Jenkins 2016). In Asia employment relations have also seen considerable transformation in recent decades. Although workers in Asia have long been subject to unstable, uncertain, and insecure work, in places where industrialization took root in the 1950s, 1960s, and 1970s, such as Japan, South Korea, and Taiwan, “standard work” usually meant employment in large corporations that tied workers to companies through lifetime employment and rising wages linked with employment seniority. Such arrangements are now challenged by the rise in part-time, contracted, and short-term employment. In later industrializing economies, such as Indonesia, Thailand, and Malaysia, industrial employment has been less developed and less defining of the nature of employment. These late industrializers exhibit patterns where employment is highest in services, especially in the so-called informal sector (see the section “Informal Economy” later in this chapter). In these countries neoliberal economic policies have also intensified, meaning that welfare regimes remain limited; and precarious work means precarious lives, families, and communities. The idea of precarious work has resonated with scholars and the public, as it permits consideration of the changing nature of work and employment in ways that transcend the dichotomies that have characterized previous studies of work, most notably the twinning of standard and nonstandard employment, or formal and informal work. Such dichotomies have proven unfit for dealing with the complexities of global production. This is where analysts have found the concept of precarious work useful, because it includes situations in which workers bear the risks of work regardless of whether they are in regular (standard), nonregular, or informal economy arrangements. In defining precarious employment, Vosko (2010: 2) writes of “work for remuneration characterized by uncertainty, low income, and limited social benefits and statutory entitlements.” She adds that this kind of work is shaped by the relationship between employment status (i.e. self- or paid employment), form of employment (e.g. temporary or permanent,

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part-time or full-time), and dimensions of labour market insecurity, as well as social context (e.g. occupation, industry, and geography) and social location (or the interaction between social relations, such as gender, and legal and political categories, such as citizenship). (Vosko 2010: 2)

A range of terms have been used to describe the unstable, uncertain, and insecure features of precarious work: atypical, irregular, or nonstandard work; temporary or seasonal work; casualization and part-time work; homeworking; self-employment; contracting-in and contracting-out; informalization; flexibilization; and contingent employment (see Arnold and Bongiovi 2013: 289). These related terms have tended to be subsumed in the concept of precarious work.2 Although criticized for its lack of precision, the definitional fuzziness of precarious work is also useful for capturing the varied categories of work that are not at all “new” but that allow employers to lower costs, limit or reduce the permanent workforce, maximize their flexibility, reduce labor’s capacity for organization, and shift employment risks to workers. As we said, both standard/regular and nonstandard/nonregular work can be considered forms of precarious work, depending on whether they are associated with social or legal protections and whether workers bear the risks of work. It may seem obvious that cost-reduction strategies would spur the use of various forms of precarious work. Indeed, in many of the earliest studies of contingent work— a term used in the United States to denote the use of labor only in response to employers’ demand— an employer’s prime motivation was to control costs by reducing the time that paid workers were idle or working below capacity, trimming benefits, and laying off workers (see Polivka and Nardone 1989: 12 – 13). The desire to better control labor— often portrayed as a search for more flexible labor markets— has also had a significant impact. Levels of unionization, collective bargaining arrangements, and workplace regulation have each been identified as important factors affecting investment decisions as businesses seek to avoid such arrangements (see Cooke 2001a, 2001b). Likewise, Evans and Gibb (2009: 40 – 41) have argued that the rise in precarious work has three motivations: (1) Hourly wage costs are reduced; (2) workers can more easily be dismissed when product demand declines; and (3) beyond costs, ideology is involved as businesspeople reject regulation of their activities.

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In the following sections we consider in more detail several terms often associated with precarious work: nonstandard or nonregular employment, the informal economy, and self-employment. Nonstandard/Nonregular Employment Relations

The standard employment relationship was defined by Rodgers (1989: 1) as employment that “incorporated a degree of regularity and durability in employment relationships, protected workers from socially unacceptable practices and working conditions, established rights and obligations, and provided a core of social stability to underpin economic growth.” Later, Kalleberg et al. (2000: 257– 58) defined the SER as “characterized by the exchange of a worker’s labor for monetary compensation from an employer . . . , with work done on a fixed schedule— usually full-time— at the employer’s place of business, under the employer’s control, and with the mutual expectation of continued employment.” This definition and others like it give expression to the arrangements associated with Fordist production regimes. Nonstandard work, as standard work’s binary opposite, consists of a diverse set of work arrangements and has been described as “employment relations other than standard, full-time jobs . . . [such as] part-time employment in an otherwise standard work arrangement, day labor and on-call work, temporary-help agency and contract-company employment, independent contracting, and other self-employment” (Kalleberg et al. 2000: 258; see also Kalleberg and Vallas 2018). The analytical usefulness of this binary is challenged by the fact that not all standard work is stable, secure, and certain— and it has become less so with the spread of the kinds of neoliberal political and economic policies that we describe in this book. Informal Economy

Another binary is that between formal and informal economic sectors. This categorization is associated with the work of W. Arthur Lewis (1954) and his conception of “unlimited” labor supplies for initial industrialization as workers left the agricultural sector and moved into urban labor markets. These urban labor markets see a “coexistence of a small, wellorganized formal sector characterized by relatively high earnings and attractive employment conditions with a large informal sector characterized by low and volatile earnings” (Günther and Launov 2012: 88).

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Scholars in the early 1970s, including ILO researchers in Kenya, argued that the “modern” sector (the formal economy) was distinct from the “traditional” or “transitionary” economy sphere (the informal economy), with workers in these economies existing separately. This view makes the extent of the formal sector a measure of modernization. It also means that, where informal sectors persist, poverty is likely to persist as an artifact of the traditional economy. In policy terms the ILO recommended making linkages to and growing the formal economy, creating more jobs in the formal sector and, ipso facto, reducing poverty (Bernards 2018). Hence the informal economy is not modern because, even though it includes the activities of owners, firms, and workers, the businesses involved are unregistered and do not pay taxes in the way that formal— and “modern”— businesses are meant to (Rothenberg et al. 2016: 96). Using ILO definitions, Arnold and Bongiovi (2013: 292) defined “informal employment” as including “all remunerative work, both self-employment and wage employment, not recognized, regulated, or protected by existing legal or regulatory frameworks, as well as nonremunerative work undertaken in an income-producing enterprise.” In other words, on the one hand, informal employment is considered insufficiently institutionalized to be regulated by the state; on the other hand, formal employment is characterized by stability of employment, wage, and legal regulation. Like self-employment, micro-firms and their “entrepreneurs” have been receiving considerable attention. This enterprisecentered approach overlaps with definitions of self-employment and informal enterprises. The latter are owned and operated by individuals or households and are not independent of their owners (Hussmanns 2005: 3). In recent years the policy response to this informality or lack of institutionalization has revolved around microcredit and micro-enterprise reform, conceptualized as unleashing “entrepreneurialism” (see de Soto 2000: ch. 2). The informal sector is characterized by its small scale of work with little or no division of labor and capital as factors of production, economic activities occurring outside legislation or administrative rules, and employers and earners bearing the risks of work. Informal employment is composed of all types of employment in informal enterprises, and workers are not covered by legal definitions of “employee,” so they do not receive the social and legal protections available to employees in formal employment.

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The informal sector includes own-account workers working in their own small-scale informal sector enterprises, employers working in their own informal sector enterprises, contributing family workers, members of informal producers’ cooperatives, and workers not covered by social protection and national labor laws in the formal sector (Vanek et al. 2014: 5.) Orthodox economists have tended to assume that the informal sector would decline as labor supplies from rural areas tightened, driving wages higher, improving conditions, and promoting further formalization (Chen 2016). These expectations have not been realized. For example, as shown in Latin America and Southeast Asia, economic growth has been accompanied by an increase in informal employment over the past three decades (Jütting and de Laiglesia 2013: 12). In many developing economies, including Indonesia, informal sectors remain substantial (see Chapter 4). Global data suggest that more than 60% of workers are in the informal sector, whereas in the Asian region 68% work in the informal sector (ILO 2018). The OECD and ILO summarized the global situation in 2016, stating that most of the world’s employed population is in informal employment: 2 billion workers, representing about 61% of all workers including agriculture and 50% excluding agriculture. Informality occurs in all types of employment and, globally, includes above 4 of 5 own-account workers, 1 of 2 employers, 2 of 5 employees and all contributing family workers (by definition considered informal). (OECD/ILO 2019: 16)

In Indonesia, small groups of workers make up the so-called modern or formal sector (many of whom are in the public sector); they have some benefits, relative security, and even access to collective bargaining. However, this small formal sector is undergoing rapid informalization, whereas the informal sector is persisting and expanding. In this context precarious work is a potentially more useful conceptualization than such binaries as informal sector versus formal sector and nonstandard work versus standard work for describing the transformations in work that are taking place in countries such as Indonesia. Self-Employment

Mainstream economists and social scientists often consider informal selfemployment and household employment as economic anachronisms, fading from modern economies as agriculture declines and urbanization and

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firm concentration continues apace, reducing the once numerous selfemployed to a residual category (Light 1979: 31). In developing countries burgeoning informal sectors and the agricultural sector are considered connected, with those leaving agriculture bridging to the modern sector through informal self-employment and family employment. Indeed, waged employment is considered “modern,” whereas self-employment is associated with the informal economy, both urban and rural (Arnold and Bongiovi 2013: 291– 92). More recently, two other mainstream questions have revolved around self-employment and household employment. One is associated with the question of whether the sphere of self-employment is one that incubates entrepreneurs (Light 1979). This is linked with the second question, which revolves around whether self-employment is a life choice or results from poverty (Yamada 1996). The policy outcomes associated with these questions imply a need to support the self-employed: For those who see entrepreneurs as making voluntary choices to become self-employed, providing support is critical, including microfinance. Microlending is also considered crucial for addressing poverty, though additional protections and supports are required. The essential problem with such a mainstream approach is its basic assumption that self-employment and household employment are markers of an incomplete transition to a modern economy. A corollary is that poverty is also conceptually located in this incomplete transition. The evidence is that such assumptions are flawed. According to Chen (2014: 5), homebased workers “represent a significant share of urban employment in some countries, particularly for women and especially in Asia.” Chen cites data for India and Pakistan that show that home-based workers account for 14% and 4% of total urban employment and 32% and 31% of women’s urban employment, respectively. For 2013 the Gallup organization reported that almost 30% of the global workforce was self-employed. By region the highest rates were in Southeast Asia (41% of the workforce), East Asia (39%), and sub-Saharan Africa (36%), and the lowest rates were in North America (7%) and the European Union (10%). Worldwide, the self-employed are poorer and less educated than the population where they reside. In these circumstances the Gallup report states that self-employment is likely to be a necessity rather than an opportunity (Ryan 2014). In fact, such data indicate that the overlapping categories of household-based production, self-employment, and other informal employment have been integral to

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capitalist production (see Littlefield and Reynolds 1990; Westra 2018). In recent times, increased competitive pressures have resulted in the consolidation and expansion of these categories. As we will show in Chapter 4, being self-employed in Japan tends to be voluntary, whereas in South Korea and Indonesia the weight of evidence suggests that most self-employment is an effort to make ends meet. In many cases those in the so-called gig economy, which has expanded rapidly across the globe— the “self-employed”— are actually “casually employed and waged workers in disguise” (van der Linden and Bremen 2020: 179). Conceptual Framework Figure 1.1 summarizes our conceptualization of the key components of our theoretical argument. A thick direct arrow from one box to another denotes our assumption that the concepts in the first box impact the concepts in the second box. For example, the arrow from the Global Capitalism/Country Differences box to the Precarious Work box signifies our assumption that the dimensions of precarious work (i.e., nonregular work arrangements, an informal economy, and the general lack of social protections) are shaped by the dynamics of global capitalism (and the country’s position in the global division of labor) and country differences in politics and labor market and social welfare protection institutions as well as historical features of the countries. We also argue that precarious work contributes to inequalities between workers in nonregular jobs and those in regular jobs, between workers in the informal economy and those in the formal economy, and between those who are employed and workers who are self-employed. These divisions in the terms of work sustain labor market dualisms that help to explain inequality and poverty in Japan, South Korea, and Indonesia. These outcomes call for responses to alleviate them, from labor, governments, and business. These dynamics set in motion the possibilities for change. The thick arrows between the boxes in Figure 1.1 identify the main themes discussed in this book. It is important to understand that these arrows imply influence rather than causality, but even that underplays the complexity of reality. Global and domestic dynamics also affect inequality and poverty, of course, as well as politics. In addition, workers, civil society organizations (CSOs), and political parties respond to aspects of precarious work and inequality and poverty, thereby affecting politics, protests, and policies. Moreover, we do not imply that precarious work is

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Precarious Work Nonregular Work Arrangements Global Capitalism/ Country Differences Politics: State, Business, Labor

x

z Politics of Production and Distribution

Informal Economy Lack of Social Protections

Labor Market Institutions

Precarious Workers

Social Protection Welfare Policies

Gender

Inequality and Poverty

Labor Politics and Protests Labor Policies Social Protections

History

y

F I G U R E 1. 1.

Conceptual model.

caused only by global and country-level dynamics; for example, technology and industrial transformation also play roles, though in this book our focus is on political, economic, and social forces. We represent forces such as technology and industrial transformation in the model by the arrow from X to the Precarious Work box (see Figure 1.1). Similarly, precarious work is not the only reason for inequality and poverty. Economic systems, forms of ownership, and the arrangement of work also have effects on poverty and inequality, which might be manifested in precarious work. Other influences are wealth transfers and taxation systems, financialization, and business regulatory regimes (see Krippner 2011; Piketty 2013); we represent these unspecified impacts by the arrow from Y to the Inequality and Poverty box. Influences on politics, protests, and policies (such as the effects of social media, natural disasters, or pandemics) that are not due to other factors explicitly represented in the model are denoted by the arrow from Z to the Politics of Production and Distribution box in Figure 1.1. Finally, we posit that there are feedbacks from the politics of production and distribution to the other components of the model; these political dynamics can lead to structural changes in labor, business, and state relations and to changes in labor market and social welfare protections. Politics of production and distribution can also affect the incidence of precarious work and outcomes such as inequality and poverty. Finally, countries’ historical experiences have shaped all the differences among institutions and cultures in the three study countries. To some degree, history is used as a catchall category for differences in culture, politics, and institutions that are not captured by those welfare state and

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labor market institutions (and other forces) explicitly considered. A country’s historical experiences also create a path dependency that shapes the directions the country might take in the future to address precarious work and its consequences. Institutional Sources of Precarious Work We assume that the multiscalar dynamics of national, regional, and global capitalism affect the options that governments and capital have for competing in the global and domestic economies. These multiscalar forces are best explained by theories of political economy, which emphasize power relationships in the regional and global economies and those between capital and labor in the domestic economy that exert additional forces on the nature of labor and social welfare protection institutions. Worker power is the ability of workers, either individually or collectively, to obtain advantages in the labor market. Workers’ associational power derives from such collective organizations as unions and collective processes (e.g., collective bargains). Unions can enhance their associational power by joining efforts with CSOs and other interest groups in forms of social unionism. Workers’ associational power can also derive from such collective organizations as political parties and occupational groups. Associational power contrasts with structural power, which results from the resources derived from position in the economic system, such as occupational skills or organizational authority (see Wright 2000). Labor market institutions are the laws, policies, and practices that regulate the labor market (Berg 2016). These include government policies, such as minimum wages, employment protection laws for regular and nonregular workers, and active labor market policies that are linked to unemployment insurance and provide support to workers as they seek to transition back into jobs after being unemployed. Active labor market policies are related to the training systems in a country, such as whether job-relevant training is organized by the government or by employers. We argue that the interplay between global capitalism and country differences in institutions is a key explanation for precarious work. Thus precarious work emerges and reemerges as a result of the ways that the globalization of production is changing the nature of work and the balances of power between capital and labor. Vosko and Clark (2009: 33), writing about Canada, note that “processes of economic restructuring tied to globalization have led to the privatization of state enterprises, the

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removal of trade barriers, the deregulation of the economy, the decline of manufacturing and resource sectors, and the growth of the service sector.” Discussing Mexico and Argentina, Bayón (2006: 125 – 26) identifies similar processes and identifies precarious work, unemployment, poverty, and inequality as resulting in a broader “social precarity,” defined by “differential access to . . . education, health care and housing opportunities.” Many studies on the rise of precarious work identify these changes and degradations associated with the globalization of production as being linked with political, social, and economic changes stemming from the cluster of policies that promoted liberalization, deregulation, and privatization. Broadly conceived as neoliberalization, these policies have brought profound transformations of regulatory regimes. Unquestionably, in the late twentieth and early twenty-first centuries neoliberal policies became predominant, displacing the postwar Keynesianism associated with Western industrial development, welfare, and national models of capitalism. The development of precarious work in Japan, South Korea, and Indonesia yields new insights into precarious work in general, as we discuss in Chapter 2. Although the concept appeared in the Western context to describe the degradation of the quality of work and life resulting from neoliberal policy turns since the 1980s, precarious work in Asia illustrates different trajectories. These are associated with variable linkages with global capitalism, varieties of politics and culture, and different histories of the development of capitalism and work: Precarious work is a social and political process in which economic interests, state power, and cultural norms interact. It is also important to place the recent rise of precarious work in historical and spatial context, which we have done in this chapter and which we will discuss more explicitly in subsequent chapters for the three countries. Before this neoliberal turn in the international political economy, the Fordist period gave rise to the conception of standard work and the creation of modern welfare states. Mostly confined to the West, some industries in both Japan and South Korea for some periods saw versions of standard work emerge (Pirie 2008: ch. 2).3 The crisis of Fordist production beginning in the 1970s has seen a decline in standard work coinciding with the rise of neoliberal policies. The rise of precarious work reflects a decline in both standard work arrangements and social protections— provided by employers, the state, or both— that were formerly linked to

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these arrangements. It also reflects broader global processes of dispossession and proletarianization (see B. D. Palmer 2014). Precarious Work, Social Reproduction, and Gender Explanations for the rise of precarious work must also consider who the precarious workers are. In the countries we study, women are essential to their labor forces, but they are more likely to be in precarious jobs. This is especially noticeable in Japan and South Korea with their low fertility rates and aging populations. At the same time, women remain primarily responsible for family activities in all three countries, especially those relating to the care of children and other household-based work. In Japan the proportion of women of prime working age in nonregular work is five times that for men (Statistics Bureau of Japan 2018). In South Korea the gender gap in nonregular employment, though not as large as in Japan, still sees double the proportion of women in these jobs compared with men (Statistics Korea 2018). In Indonesia women are disproportionately represented in the informal economy and they are more likely to be paid less than men. More strikingly, a significant proportion of women in the informal sector are unpaid family workers in agriculture. Data for the three countries also show that women are twice as likely to be in part-time work, one of the most prevalent forms of precarious work (ILO 2020). Japan, South Korea, and Indonesia all exhibit patriarchal socialstructural arrangements, which are expressed in the different gender roles associated with family life and work. The gendering of precarious work in these countries is supported by cultural expectations associated with patriarchal gender roles, such as the desirability of marriage for a woman to a male breadwinner. It is also reinforced by power and logics about the gender role, as these influence opportunities related to work (and nonwork) and the importance of social rights to secure work and economic security. Looking at precarious work through a gender lens emphasizes families and social reproduction and includes both unpaid and paid work. Social reproduction is essential in a society for there to be a supply of workers from one generation to the next. Gottfried (2015: 3) has conceptualized this process in terms of societies having to make a “reproductive bargain,” which “composes an historical ensemble of institutions, ideologies, and identities around social provisioning and care for human beings.” Writing about Japan, she argues that the rapid economic growth in that country after World War II was possible because of a male breadwinner– female

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homemaker model that enabled men to work long hours in corporations while women took care of the household. As growth slowed, men aged, and fertility declined, Japan needed more women to participate in the labor force. This encouraged the state to provide incentives for women to take up part-time work, which allowed them to engage in paid work while continuing to take responsibility for the home and family. The male breadwinner model also characterizes South Korean work and gender patterns. In fact, the decline in women’s labor force participation in their childbearing years is greater in South Korea than in Japan. Moreover, as in Japan, Korean women returning to work after rearing their children have few chances of getting a good job and must typically settle for part-time or temporary employment. This has tended to mean that middle-class women are less likely to return to work than women from low-income families. It also means that, like Japan, the rate of women’s labor force participation is rather low, though the wage gap between men and women is larger than in Japan (S. Choi 2019). In Indonesia the gender-based arrangement also resembles the male breadwinner model. Male labor force participation rates are the highest of the three study countries, with women’s participation rates about the same as those in Japan and South Korea. Yet there is considerable pressure for women to be responsible for home and family. A 2010 survey showed that almost 60% of married couples reported that the husband’s primary activity was paid work, whereas the wife’s was housekeeping. That said, with a huge and diverse population, contradictory beliefs on gender roles in marriage are emerging (Utomo 2015). For poor women, however, labor force participation is often essential, if they can get paid work. Despite different levels of economic development, all three study countries share a relatively low level of women’s labor force participation (see Chapter 2) in contexts where there is limited public support for childcare, thus inhibiting the possibility of women’s full-time, permanent work and employment. The experience and consequences of precarious work differ by groups of workers with differential labor market resources. As we discuss in Chapters 4 and 5, gender and age are interrelated. The effects of welfare and labor market institutions vary among demographic groups and life stages. For example, active labor market policies are more relevant to younger and middle-aged workers in the primes of their careers than to older workers who may soon retire, although the degree of employment protections— by

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providing greater job security to older workers— may make it more difficult for young people to become established in the labor market and may help to foster a duality in the labor market between relatively protected insiders and vulnerable outsiders (which include young workers, women, and immigrants, depending on the country). In addition, pension benefits (a form of welfare spending) are more salient to older workers approaching retirement than to younger workers who have their working lives ahead of them. Precarious Work and Inequality and Poverty The various forms of precarious work are often low wage and associated with the working poor. This is especially true for women, as we show in Chapter 5. In this sense we argue that precarious work helps to shape inequality and poverty, though of course it is not the only factor, as we indicate in Figure 1.1 by the effect of Y on inequality and poverty. Departures from the standard work relationship have led to diverse categories of workers receiving different levels of compensation. Thus factories were once the locus of the standard work relationship, but this has changed. Factories now have teams of workers, often from labor contracting firms, working alongside regular company employees. These different sets of workers, who have diverse employers, receive different pay and benefits and have different contracts, if they have one at all. Those employed by labor contracting firms may have no contract or a short-term contract, which may or may not include benefits, and they usually lack opportunities for promotion or progress within the contracting company (Fu 2015). Some of these workers are migrants, trainees, or interns, and all are subject to different rules and remuneration, such as no pay, day rates, piece rates, or monthly pay. Other variations see workers swapping in and out of jobs, switching from the informal to the formal sector when a position opens and then back again when the job is finished (see Diatyka Widya Permata Yasih 2017). Work completed in the informal sector— by “putting out” to homeworkers or in tiny workshops— can be critical for the production of parts needed by factories where other workers assemble these components (see Unni and Rani 2008). In other cases the household becomes a locus of production that makes goods for the market— even for global supply chains— or that supplies services for other individuals and households, often with women at the center of these operations (Chen 2014).

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Such examples of the many varieties of work indicate that the post–World War II binaries developed in the West and widely used in the policy and academic literature are unable to adequately deal with the complexities of contemporary work situations. Precarious work is also related to increasing job and economic insecurity for large numbers of people and has pervasive consequences not only for the nature of work, workplaces, and peoples’ work experiences but also for individuals’ nonwork lives, including mental stress, poor physical health, and low educational success, and more broadly for families and communities. Although we do not examine these more general effects of precarious work in detail, it is clear that the growth of precarious work is a social and economic problem that affects the ability of people to raise families and to manage their everyday lives and futures. It thus has farreaching consequences that cut across many topics, such as poor welfare and housing and economic insecurity, that are salient for workers and their families, governments, and businesses. Of course, all these problems are also deeply political and reflect changes in the balance of power between capital and labor. Labor Politics Labor movements in Japan, South Korea, and Indonesia have actively responded to precarious work as an emerging social problem. In Japan general unions (godo roso) and community unions (komyuniti yunion) have emerged as alternatives to enterprise unions in organizing precarious workers. Both extend membership across enterprises. CSOs and unions have sometimes combined to form social movement unionism, achieving broad coalitions for social change (S. Kojima 2017). In South Korea nonregular workers have formed their own unionlike associations, in connection with other civic and social movement organizations, because unions of regular workers did not often find it in their interests to support the efforts of nonregular workers. The fierce labor struggles by nonregular workers, the increasing hostility toward business, and the social and political turmoil in the 2000s and 2010s reflect a deepening social and political polarization in Korea (see K.-Y. Shin 2010). In Indonesia, from late in the New Order regime and into the early 2010s, intense union and CSO activism targeted labor outsourcing and minimum wages, winning some concessions, especially on wages. However, these gains proved relatively short-lived, with legislation proposed

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in 2020 to roll them back, resulting in large demonstrations that failed to stop the law (see Lane 2019, 2020). The influence of labor unions and CSOs on labor policies in South Korea and Indonesia has been significant, not least because the competition among political parties for votes is considerable. The role of CSOs in Japan, where the Liberal Democratic Party has dominated and has been more attentive to the needs of business to promote economic growth, is more limited. Summary and Conclusions As should be clear, precarious work represents a departure from the post– World War II ideal typical model of the standard employment relationship that typified the period of Fordism. We have argued that long-held binaries in the academic and policy literature— nonregular versus regular work, informal versus formal work, self-employment versus employed— are inadequate to describe the complexities of contemporary work. Rather, we favor the notion of precarious work for describing situations where risks are borne by individuals, regardless of whether they are in regular/standard, nonregular, or informal economy arrangements. Our conceptual model posits that precarious work results from the interplay between the dynamics of global and regional capitalism and the relations between the state, business, and labor within the study countries. Who works in precarious jobs is also critical, highlighting the importance of gender and social reproduction. The rise of precarious work also contributes to an understanding of rising levels of inequality and poverty. Moreover, labor politics in Japan, South Korea, and Indonesia have responded to the problems created by the rise of precarious work. In the next chapter we provide a closer discussion of the characteristics of Japan, South Korea, and Indonesia as they relate to the conceptual arguments presented here.

CHAPTER 2

Japan, South Korea, and Indonesia

our arguments about how precarious work results from the political contests among states, multinational firms, local businesses, trade unions, and civil society organizations (CSOs) that shape employment in Japan, South Korea, and Indonesia. We discuss how each of the three countries has responded— and in some cases helped shape— the dynamics of global and regional capitalism. We seek to establish some of the main themes and questions around which our empirical material on the relationship between precarious work and inequality is organized. In contextualizing the conceptual model presented in Chapter 1, we provide a brief overview of economic development, political dynamics, and position in the global division of labor in these countries up to about the early 1990s. This provides the background for our later discussions of how these international and domestic structures helped to produce precarious work. The demographic composition and industrial structure of the three countries are also summarized.

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Japan Japan has been industrializing since the time of the Meiji Restoration. However, the rapid growth of its economic power, based on the manufacturing sector, was largely a result of the reconstruction that followed World War II. In particular, the economic boom associated with the Korean War reinvigorated heavy industry and manufacturing (Stubbs 2018). Japan thus 35

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reentered the world economy in a period dominated in the West by Fordist manufacturing and by an international system where national-level industrial and welfare policies prevailed (Ruggie 1982). To foster rapid growth, the country’s postwar leadership favored dirigiste developmentalism, in which the state played a strong role in the economy, actively directing and supporting markets and national firms rather than merely regulating them (see Johnson 1982). In return for accepting this state direction over economic policy, the Japanese state maintained strong protection for its manufacturers. As Ohno (2006: 170) points out, there “was virtually no receipt of FDI [foreign direct investment], let alone portfolio investment, from abroad.” These policies required that the state mobilize and direct funds to key industries as Japan’s industrial capacity was rebuilt. The state also supported the reestablishment of the keiretsu, large business conglomerates, linked together by cross-shareholdings, that produced a variety of products (Johnson 1982). Reflecting a Weberian perspective, Johnson (1982) viewed Japan as a “developmental state” that took the necessary policy measures to accomplish rapid economic upgrading. He claimed that Japan’s industrialization had much to do with interventions by bureaucratic elites, particularly those employed at the Ministry of International Trade and Industry. In this context, firms became significant in the coordination of the economy and in employment relations. The resulting hierarchical division between large and small firms helped to maintain a dualistic labor market. The economic results of developmentalism were spectacular, with the country achieving continuous economic growth for the postwar period until the 1973 oil crisis. Immediate postwar GDP growth rates averaged 7%, rising to 9% between 1953 and 1965 and to 9.5% from 1966 to 1972. Japan became the world’s second largest capitalist economy in the early 1970s (World Bank 2020b). The jump start provided to the manufacturing sector by the Korean War saw production expand for textiles, vehicles, raw materials, metal products, and medicines. Dower (1999: 541– 42) calculates that U.S. special procurements during the Korean War injected $2.3 billion into the Japanese economy. In addition, the influx of military personnel and their families stimulated construction and services in Tokyo and the areas around military bases. When hostilities ended, the United States also allowed Japanese firms to participate in South Korea’s reconstruction (Dower 1999: 542).

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In the early postwar years, riding on the high growth generated by the Korean War, the state and corporations promoted industrial “catch-up” by increasing productivity through investment in technology and by reorganizing production systems and management (Ohno 2006: 164). This policy mix and associated infrastructure investment produced spectacular growth rates. Although this catch-up strategy was largely inward looking, Japan soon began to reintegrate with the world economy. In the 1950s and 1960s this mainly involved cheap manufactured exports. Gradually and carefully, state policies strategically liberalized trade and encouraged large firms to be more outward looking. The pursuit of this development strategy involved considerable contestation with labor. In the immediate postwar period, the labor movement and union organization experienced drastic changes under General Douglas MacArthur, who was in charge of the Supreme Command of the Allied Powers (SCAP). Initially, the occupying authorities favored a free labor movement. New Deal– influenced officers in SCAP’s Labor Division drafted a law in 1945 to resemble the American 1935 Wagner Act. The resulting 1945 Trade Union Law legalized unions, thus allowing workers to organize themselves without interference from either the government or employers. The law’s immediate impact was an explosion of union membership, with union density increasing from just 3.2% in 1945 to 55.8% in 1948. Some of the organizers were communists who had been imprisoned by the Japanese military and released by SCAP. Within a year the communist-led Sanbetsu (Congress of Industrial Unions) became the largest union federation. The second largest union federation, Sodomei (Japan Federation of Labor), was led by more moderate social-democratic reformers. Both federations confronted owners by organizing “production control” at the workplace, supporting workers to control workplaces (and continued production only to meet direct needs), and backing nationwide general strikes (genesuto) to improve workers’ standard of living and to confront conservative governments (see Glassman 2018: ch. 3). In the face of vigorous and widespread union activism, in 1947 SCAP reversed its policy of reorganizing unions. The upsurge of leftist unions threatened the United States’ main goal of transforming Japan into a model of liberal politics in an Asian capitalist society. At the same time, the rise of conservative politics in the United States and the advent of cold war anticommunism shaped political and policy change in Japan

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(T. Cohen 1987: 366 – 67). Importantly, organized labor became a political target, with radical union leaders and members particularly vulnerable and with vast layoffs undercutting the power of the radical unions at the enterprise level. In 1947 SCAP approved a law that would allow businesses to dismiss workers to “improve efficiency.” The state and businesses used the amended Labor Relations Adjustment Law and the 1947 Trade Union Law to destroy communist-led unions in the public sector (Harari 1973). Rightists and business leaders organized against leftist unionism in the private sector and at particular enterprises to oppose industrywide national unions. Management encouraged its employees to organize new unions and quickly recognized them as the sole bargaining representatives of the workers at the enterprise level (Dore 1973: 327– 29; Andrew Gordon 1985: 371– 72). With radical union leaders purged, industrial unions gave way to enterprise unions, the latter becoming the dominant form of union. The Sanbetsu had all but disappeared by the early 1950s, shrinking from a peak of more than 1.3 million members in 1948 to just 47,000 by 1951 (Japan Rodosho Daijin Kambo 1966: 434 – 35; Ministry of Labor 1966: 440). The state promoted and controlled this preferred model of enterprisebased unionism by providing enterprise-based employment and wage security for regular workers and by ending the differential treatment of blue- and white-collar workers by integrating them under the principles of lifetime employment and seniority wage systems (Imai 2015). This system provided Japanese capitalism with considerable vitality. Although generally limited to men and larger firms and thus creating inequalities by gender and firm size, this Japanese-style employment system launched the country’s own golden age, where employment for men was made relatively secure (Imai 2011: 18 – 22). Called welfare corporatism by Dore (1973), this model helped make Japan a globally recognized center of efficient manufacturing and promoted the transition to the production of high-quality goods. Japan’s economic growth faltered with the 1973 oil crisis but soon regained its growth. By the 1970s Japanese capitalism had become a locus of an emerging international division of labor and commodity chains centered on Asia. During the cold war era, Japan played a leading role in reshaping economies in East Asia by investing in and transferring advanced technology to other East and Southeast Asian countries linked with Japan in production and trade networks (Kimura 2006: 327– 28). With the end of the cold war, economic integration among Asian countries accelerated as

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diplomatic relations between former antagonistic countries such as South Korea, China, and Vietnam were normalized. Hence China and Southeast Asia emerged as importers of FDI, with Japan being the major investor in the East and Southeast Asian regions (Komiya and Wakasugi 1991). The next challenge came as the United States demanded a reduction in trade deficits with Japan in the mid-1980s. To this end, the Plaza Accord, signed at the Plaza Hotel in New York on September 22, 1985, resulted in a 46% depreciation of the U.S. dollar in relation to the yen and deutsche mark. As a result of the yen’s appreciation, to prop up profits, Japanese companies began to invest in other countries, seeking lower-cost production sites. Japan’s FDI increased by more than 450% between 1985 and 1989 (Mihut 2014: 728). At the same time, stock and asset prices in Japan tripled, creating an asset bubble that persisted until late 1991 (Barsky 2011: 20 – 21). When the bubble economy finally burst, a long period of economic stagnation, called the Lost Decade, followed. Since the collapse, growth rates have hovered around zero. Over this period the economy and institutions of employment relations were transformed, as companies sought to enhance flexibility in Japan’s labor market while relocating even more production to China and Southeast Asia. As will be discussed in Chapter 4, one outcome of long-term economic stagnation has been that the proportion of nonregular workers among the total employed has more than doubled, from 16.4% in 1985 to 38.2% in 2018 (Statistics Bureau of Japan 2018). South Korea South Korea’s capitalist expansion has also followed the pattern of dirigiste developmentalism seen in Japan. South Korea’s developmental state emerged in the cold war era, beginning under the authoritarian regime led by General Park Chung-hee. Park took power through a military coup in 1961, destroying a short-lived democratic government that, following student demonstrations in April 1960, had replaced the dictatorship of President Syngman Rhee in 1960. Park, who held power until 1979, when he was assassinated, took over an economy still devastated by the Korean War, which had divided the country. Park’s regime embarked on a state-led nationalist program of rapid industrialization that was also meant to enhance the military regime’s legitimacy (Johnson 1999; E. M. Kim 1997). As Amsden (1989) has emphasized,

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this program, spurred by state planning for industrial development through a series of five-year economic plans, transformed South Korea’s economic base over a relatively short period. To generate the capital necessary for industrialization, the state, as in Japan, directed investment and domestic firms using a set of processes that effectively created a powerful capitalist class dominated by a few large, state-privileged, family-controlled conglomerates that became known as chaebol (Pirie 2008: 73). Park’s regime wholeheartedly supported U.S. anticommunism efforts in the region, including deploying combat troops to South Vietnam beginning in 1965. Huge remittances from the troops and profits made by Korean contractors working in Vietnam War– related businesses provided crucial financial resources for the development of the chaebol (K.-Y. Shin 1998; Glassman 2018: ch. 4). Under cold war arrangements the United States allowed South Korean firms to export manufactured products to the American market with a preferential tariff system under the Generalized System of Preferences. This arrangement greatly benefited the chaebol and consumer exports to the United States until they were withdrawn under the Reagan administration in 1988. By that time South Korea’s economic development had significantly expanded. Between 1963 and 1979 the country’s average annual growth rate was 10.54%. After a short downturn following the military coup in 1980, rapid economic growth returned and between 1981 and 1996 grew at an annual average rate of 9.32%. As part of its efforts to industrialize, the military regime disorganized workers, limited collective bargaining, and suppressed unions. One result was that the rate of unionization remained low during the 1960s and 1970s, at around 20 – 24% (D. Park and Park 1990: 31). Yet even this figure probably overestimates union density, as many unions operated as the regime’s political organs rather than as independent organizations representing the interests of workers (J. J. Choi 1989; Koo 2001). The military-dominated state was also able to use the National Security Act to repress workers, arresting pro-labor activists as well as political dissidents. In 1961 President Park introduced the Anti-Communist Law, which allowed the military regime to punish those it considered the regime’s opponents, essentially anyone who criticized the military government (Koo 2001: 12; K.-Y. Shin 2017). Hence labor activists and workers who went on strike were accused of threatening national security or working to benefit communist North Korea and were liable to arrest and punishment by the state’s security police.

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On October 26, 1979, President Park was assassinated. At the time, he faced challenges on the economic front because of the Second Oil Crisis, with growth rates falling precipitously. The economic crisis gave rise to student demands for democracy. In May 1980 General Chun Doo-hwan, the director of the Military Intelligence Agency, took political power by military coup. Even though growth rates were soon restored, Chun’s regime continued to face opposition from students and, increasingly, from workers, who often faced brutal working conditions (see J. J. Choi 1989). A turning point came in May 1980, when troops were deployed to suppress pro-democracy demonstrations in Kwangju, killing hundreds. Chun also established the National Emergency Committee, a temporary military junta, which subsequently carried out a purge of political dissidents. The National Emergency Committee destroyed industrial unions, replacing them with enterprise unions, and detained and sent active union leaders to the Samchong Military Camp (J. Kim 1989: 42). The Chun regime proceeded to amend the labor relations laws to further limit labor organizing, allowing only company (i.e., enterprise) unions and a single union for each company. Only one peak labor organization, the Federation of Korean Trade Unions (FKTU), was permitted by the 1981 Labor Relations Law. The FKTU was anticommunist and financially supported by the military regime, and it had a monopoly on legal labor organization at the national level (Korean Association of Labor Laws 2012: 418). With the FKTU aligned with the regime, alongside other draconian controls exercised over labor organizing, companies could continue to grossly exploit workers, subjecting them to 12-hour shifts and 7-day workweeks. When workers rebelled against these conditions, gangs of thugs broke wildcat strikes and police used terror and torture tactics against labor leaders and organizers (Goldner 2008). In addition to suppressing independent labor organizing, the military-dominated government maintained strict controls over the wages of factory workers, imposing limits on wage increases each year. A key result of the long period of military-backed government and the repression of labor was the consolidation of the chaebol. During the 1970s and 1980s, alongside considerable state support and state-led exportoriented industrialization policies, several relatively small family-owned companies became global conglomerates. State-enforced low wages guaranteed the price competitiveness of the chaebol’s industrial and manufactured goods in the international market.

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The strong nexus between labor oppression and successful exportoriented industrialization continued until the political crisis of the military regime in the late 1980s. After Chun nominated General Rho Tae-woo as the presidential candidate for the ruling Democratic Justice Party, mass protests erupted. The challenge came from renewed democratic struggles by university students, workers, and other citizens that eventually paralyzed the military government in June 1987. More than 2 million protesters demanding democracy participated in street demonstrations held across major South Korean cities. Nationwide, workers’ protests erupted, with more than 2,000 new unions formed and over 3,500 strikes. Many of these were spontaneous strikes in large, nonunionized companies. Factory workers, mostly employed in the chaebol, held large sit-down strikes and street demonstrations, demanding wage increases, union recognition, and better treatment by their employers and the state. In the end, the people’s power proved too strong. Rho surrendered to the demands for democracy, accepting the need for a political negotiation for democratic transition including extending civil rights, freedom of the press, and free elections. This wave of strikes and union formation, which saw labor organizing independent unions at both the company and the regional level, challenged the workplace despotism fostered by state and capital and demonstrated that workers would no longer tolerate low wages and poor working conditions (Koo 2001: ch. 7). These newly organized unions rejected the state-sponsored FKTU, mostly affiliating with a new and independent confederation of unions, the Korean Confederation of Trade Unions (KCTU), which was officially established in 1995. Because of the strong legacy of company unions, the KCTU was organized at the national level, as a nationwide solidarity organization. KCTU membership included large unions, such as the Union of Hyundai Motor Co., as well as many small unions, including some from the public sector. Of course, some owners and managers tried to destroy or co-opt the newly organized unions. However, in an era of anti-authoritarianism, work and labor had become major social issues and management control was challenged in many workplaces. Indeed, workplaces had become highly contested political terrains. Indonesia Capitalist industrialization began in Indonesia under Dutch colonialism but is mostly associated with President Suharto’s New Order political

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regime (1965 – 1998). The reformation, or reformasi period, that resulted from the demise of the New Order coincided with the 1997– 1998 Asian economic crisis. Reformasi unleashed linked processes of democratization, decentralization, and marketization. To comprehend the politics and economics associated with the period since 1965, it is necessary to briefly examine the historical development of capitalism and labor regimes in Indonesia. When colonialism ended in 1949, the Indonesian economy was dominated by small-scale agriculture with capitalism only weakly developed, although commodification and capital-labor relations had been established (Ingleson 1986). For example, during this period, a small Dutchdominated capitalist class operated in trade, industry, and plantation agriculture, focusing on valuable commodities such as coffee, sugar, tea, spices, oil, rubber, and tin. These activities produced a substantial surplus for the Netherlands (Alec Gordon 2018). Decolonization prompted a turn to nationalist economic policies. The aim of President Sukarno’s new administration was to have Indonesians replace Dutch and Chinese owners and managers. Yet it was not until the late 1950s that Dutch economic interests were expropriated, followed by the expropriation of other Western-owned businesses in 1963 – 1965 (Golay et al. 1969: 124 – 25, 192 – 93). The continuing dominance of agriculture and the weakness of indigenous business saw a shift to state investment in banking, public utilities, and trade as a means to boost economic growth (Robison 1986: 36 – 37). Political turbulence and economic stagnation plagued Sukarno’s nationalism, and in 1965 the military ousted him. Like the military government in South Korea, a major aim of the new regime, led by General Suharto, was to increase economic growth. Yet growth initially stagnated, and it was only the shift in political-economic alignment associated with Suharto’s regime that boosted growth after 1967. During the cold war, Suharto’s regime realigned with anticommunism and, with the enthusiastic support from the United States and its allies, replaced Sukarno’s nationalism, “neutralism,” and confrontation with the West with pro-Western policies. The events of the rise of Suharto’s New Order were murderous and traumatic, with millions killed and jailed, casting the regime as authoritarian and ruthless (see Roosa 2020). Unlike Japan and South Korea, Indonesia’s cold war realignment did involve increased foreign investment for economic development, with the

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regime placing considerable emphasis on accessing foreign capital and mostly eschewing East Asian notions of dirigisme. With a new and liberal regulatory regime in place, foreign investment leapt in the first years of the New Order (H. Hill 2000: 77). One result was that the economy grew quickly, averaging 7.7% annually throughout the 1970s. Yet it must be recognized that this growth was uneven; it was focused on Java, and other regions, which relied on agriculture, lagged. This was reflected in sectoral growth, where agriculture trailed industry. Even agriculture saw uneven development, with some areas experiencing increased commodification and commercialization and other areas remaining engaged in subsistence production. The expansion of oil production and exports with rising international prices in the 1970s allowed the state to return to spending on some nationalist projects (H. Hill and Shiraishi 2007: 124). Yet this investment never approached the developmentalism seen in East Asia. Later, as oil exports slowed in the early 1980s, economic policies became even more liberal, exports diversified, and there was a renewed emphasis on attracting foreign investment (H. Hill 2000: 11– 16; Robison 1987). The New Order economy saw rapid structural change. Most noticeably, the economic contribution of the agricultural sector declined from 55% of GDP in 1966 to 17% in 1995. Industry’s contribution rose from 10% to almost 42% over the same period. Meanwhile, services expanded from 35% to 41%. Associated with a shift from import substitution industrialization (ISI) to export-oriented industrialization (EOI), state firms gave way to private investment in manufacturing and prompted another round of foreign investment, increasingly from Japan and South Korea (Robison 1997: 34; H. Hill 2000: 154). Japan’s offshoring of manufacturing following the Plaza Accord saw Japanese investment increase rapidly from $250 million in 1986 to $2.5 billion in 1997 (JETRO 2019). Over the same period, Japan was also Indonesia’s largest trading partner. The Plaza Accord also saw the Korean won appreciate, and Korean investment in Indonesia more than quadrupled from about the late 1980s to 1997 (Lindblad 2000: 172). Manufacturing industry in low-wage Indonesia expanded with the rise of offshored manufacturing and the deepening of global supply chains. During the 1970s, manufactured goods never exceeded 3% of total merchandise exports, but from 1980 to 1992 they grew at an annual average rate of 20 – 30% in real terms and accounted for almost half of merchandise exports in 1992. Most of the manufactured exports were in labor-intensive areas, such as clothing, footwear, and electronics. Although this growth

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was stimulated by foreign demand and foreign investment, it was domestic capitalists who drove manufacturing investment, building the subcontracting factories that produced the export products (H. Hill 2000: 164 – 70). Yet, unlike Japan and South Korea, few Indonesian firms developed into powerful, internationally competitive conglomerates. Rather, close state-capital cooperation in this period led to the emergence of politically connected conglomerates investing across all sectors of the economy. In something of a paradox, as the late New Order regime deregulated, these conglomerates increased their control of the economy as Suharto, his family, and his cronies dominated investment and made huge profits. This capacity for cronyist rent seeking meant that there were few incentives to move up the value and technology chain (Robison 1997: 33 – 41). As the manufacturing sector expanded, so did employment in the sector, doubling during the period from about the mid-1960s to 1990, reaching 2.66 million nationally, although this rate was far slower than the sector’s export growth (H. Hill 2000: 170 – 73). Processes of dispossession and low incomes in rural areas drew migrants to cities and to manufacturing and services, contributing to the rise of employment in the informal sector. At the same time, the New Order, funded by the World Bank, the Asian Development Bank, and several Western governments, implemented policies to encourage migration from overpopulated to underdeveloped regions. With an emphasis on commercial agriculture, transmigration had considerable environmental consequences, including the destruction of forests, drainage of swamps, removal of habitats for animals, and burning of peat and rain forests (see Fearnside 1997). During the New Order, waged employment growth was most rapid in the service sector, which came to employ almost as many Indonesians as agriculture by the mid-1990s (K. Kim et al. 2018: 22). Jobs in services included middle-class white-collar positions in finance, real estate, consulting, and the like, but most of the jobs created were working-class and informal sector jobs in transport, food services, and trade. Because most service sector workers were in relatively low-paid jobs at the low end of the sector, productivity in the sector was also at low levels. In contrast to Japan and South Korea, Indonesia’s factory sector remained comparatively small under the New Order. The shift from ISI to EOI saw manufacturing employment expand, but mostly in low-skill and low-wage areas (H. Hill 2000: 167). There was no Fordist golden age for Indonesian workers, and Indonesia’s (limited) industrialization occurred

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as Fordism and standard employment were in decline in the West and as Japanese and Korean employment was also changing. Other than those in the state sector, few workers experienced anything resembling the benefits of the West’s Fordism or the lifetime employment that emerged during Japan’s industrialization (World Bank 2016: 17). For much of the New Order period workers were prevented from forming independent unions, received low wages, and had limited employment security (see Lambert 1997; Hadiz 1997). Most important, the New Order regime sought to keep wages low to support both private and state enterprise employers. Unions were banned, except for the state-created and state-controlled association for state employees, the Civil Servants Corps (Korps Pegawai Republik Indonesia), formed in 1971, and the state’s official union, the Federasi Buruh Seluruh Indonesia (later known as Serikat Pekerja Seluruh Indonesia), formed in 1973. However, as manufactured exports became more significant for the economy, in the 1980s and 1990s there was something of a revival of labor politics and worker unrest (Hadiz 1997: ch. 7). One result was that, following a long period when wages were held abnormally low, there were considerable increases in the minimum wage (Tjandra 2016: 67– 68). Nascent Regionalism Our comments on the cold war era point to the significant connections between Japan, South Korea, and Indonesia. As argued by both Gottfried (2018) and Glassman (2018), the early postwar and cold war periods saw the U.S. anticommunist security apparatus police the East and Southeast Asian regions, initiating a developing regionalism. This security regionalism was accompanied by a developing capitalist regionalism. Later, following the Plaza Accord, Japan became a major investor in the region. In 2017 Japan was the largest investor in the countries of the Association of Southeast Asian Nations (ASEAN), as it had been for several years. In addition, by this time South Korea was ranked in the top 10 investors in the region. Manufacturing had long received much of this investment, often attracted by state incentives, including subsidiaries, but in recent years services have been receiving larger flows of FDI (ASEAN Secretariat 2018: 3 – 9). Although not a focus of our discussions in this book, the migration of workers is important in the region. In some ways Southeast Asia’s colonial history has been defined by international migration, particularly of Chinese and Indians into the region. More recently, cross-border migration

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has developed with changing labor markets in Japan, South Korea, and Indonesia. Migrant labor circulates in the corridors connecting work and remittances across Asia. The migration of Indonesian workers for work began in the 1970s, and there are now 9 million Indonesians working overseas (UN Women 2019). Although most migrant workers across the region are women, in Japan about 70% of the 15,000 Indonesian migrant workers are male, working in manufacturing, construction, agriculture, and fisheries. They reach Japan mainly through “training programs” that do little meaningful training and provide employers with cheap labor that is not covered by labor law (Isabella 2016). South Korea has about half this number of Indonesian migrants, making up 6% of the foreign workforce in the country, who work mainly in manufacturing and fisheries (Antara News 2019). Japan and South Korea discourage settlement by migrant workers, meaning that, although migration fits a regional pattern, as in Japanese and Korean factories in Indonesia, the country also provides cheap migrant labor in the home country. Population and Labor Force Table 2.1 provides some basic information on the population and labor force of each country. Indonesia is the largest of the three, with a total population of 264 million, which is more than twice that of Japan (126 million). South Korea has the smallest population, 51 million. Indonesia also has the largest labor force and the largest number of economically inactive people. South Korea is the smallest of the three countries on all these measures. Japan is the richest country, with a GDP per capita that is 10 times that of Indonesia. Particularly striking in Table 2.1 is the high youth unemployment rate in Indonesia and South Korea and the relatively low rate in Japan. Part of the reason for Japan’s low youth unemployment rate is high levels of education and programs created by the government in schools. These programs have given young people a more realistic picture of future jobs and established relationships between the universities and workplaces that enabled students to obtain internships that provided them with work experience. Despite this, Japan is an unequal society, with the worst intergenerational inequality in the world (Newman 2012: 47). The labor force participation rates for women are similar in each country but are relatively low by OECD standards, at about 53%. By contrast, the labor force participation rate for men is higher, especially in Indonesia (82.2%); this figure

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TA B L E 2 . 1.

Population and Employment Data on Japan, South Korea, and Indonesia,

2018 Indicator

Japan

South Korea

Indonesia

Total population (millions)

126.4

51.3

264.2

Population age 15 years and older (millions)

111.0

44.2

198.1

GDP per capita (current U.S. dollars) Gini index (before taxes and transfers)

39,159

33,423

0.46

0.35

3,894 0.40

Economically active (millions)

68

28

122

Employed (millions)

67

27

115

Unemployed (millions)

2.0

1.1

7.6

Unemployment rate (%)

2.4

3.8

4.4

Youth unemployment rate (%)

3.6

10.3

21.7

Employment expansion rate (%)

2.0

0.4

2.3

Labor force participation (%)

61.5

63.4

67.6

Employment to population ratio (%)

60

61

65

Men’s labor force participation rate (%)

71.2

73.8

82.2

Women’s labor force participation rate (%)

52.5

53.3

53.2

Median age

47.3

41.8

30.2

Births per 1,000 population

7.3

8.2

15.4

Number of children born per woman

1.43

1.29

Birthrate

Life expectancy (at birth)

2.04

86

82.6

73.7

25– 64 years old

48

46

8

25–34 years old

59

68

10

Education (% completing tertiary education)

Source: Various national, CIA, ILOSTAT, OECD, and World Bank databases.

seems high by middle-income country standards and in the region and is more like the pattern seen in low-income economies. A key demographic characteristic is the age of the population. Japan is well known as having an aging population, with the second highest median age in the world. This reflects both high life expectancy and the low birthrate. Indonesia is a much younger country, with a median age just

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over 30 years, reflective of a relatively high birthrate and a shorter life expectancy at birth. Even so, the birthrate is more than double the death rate. South Korea falls closer to Japan, with a low birthrate and a relatively high life expectancy. According to the World Bank database, the percentage of the population that is 65 years and older increased from 8.7% in 1979 to 28.0% in 2019 in Japan, from 4.1% to 15.1% in South Korea, and from 3.6% to 6.1% in Indonesia. In line with these demographic profiles, Japan has seen plummeting marriage rates and increased one-person households. Japan’s marriage rate has declined from 10 per 1,000 people in 1970 to 5.9 in 1990 and to 5 in 2016, leading to a birthrate far below the reproduction rate. The proportion of one-person households rose from 23.1% in 1990 to 34.6% in 2015 (Gender Equality Bureau Cabinet Office 2018: 2 – 3). In South Korea marriage rates and birthrates among youth have also been declining. The crude marriage rate decreased from 9 per 1,000 people in 1993 to 5 in 2018, and the total fertility rate is now the lowest in the world (Statistics Korea 2020b). With its younger and increasing population, Indonesia’s marriage rate has grown, with men and women tending to marry at younger ages than in Japan and South Korea. Finally, it is worth noting that Indonesia stands out in having a low level of postsecondary education. The cumulative total of Indonesians having completed upper secondary education is 34% of all those aged 25 years or older (31% for women), far below that in Japan at 80% (79% for women) and South Korea at 76% (70% for women). The figures for higher education show that just 10% of the Indonesian population has a postsecondary education, compared with 40 – 45% in Japan and South Korea. This has a considerable effect on the workforce and the level of skills available. Industrial Transformation Table 2.2 provides information on the industrial transformations in each of the three countries, for primary (agriculture, i.e., farming, forestry, mining, fishing), secondary (industry, i.e., mainly manufacturing), and tertiary (services) sectors. Although the table is focused on the 1991– 2019 period, the discussion here also reflects on earlier years. Japan’s employment structure underwent a fundamental change from 1960 to 1980, with the primary sector declining rapidly as the agricultural sector’s contribution to GDP fell and the secondary and tertiary sectors growing markedly. Since the mid-1970s the industrial sector (mainly

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TA B L E 2 . 2 .

Industrial Composition of the Labor Force in Japan, South Korea, and Indonesia,

1991–2019 % in Agriculture

% in Industry

% in Services

South Japan Korea Indonesia

South Japan Korea Indonesia

South Japan Korea Indonesia

1991

6.7

14.6

54.0

34.6

36.8

14.6

58.7

48.6

31.4

1995

6.0

11.8

44.0

31.3

33.0

18.4

62.7

55.2

37.6

2000

5.2

10.7

45.3

29.5

27.8

17.5

65.3

61.5

37.3

2005

4.9

8.0

44.0

26.4

26.6

18.8

68.6

65.4

37.2

2010

4.2

6.6

37.2

25.2

24.4

18.7

70.6

69.0

42.2

2015

4.0

5.1

33.0

25.0

24.5

22.0

71.0

70.6

44.9

2019

3.4

4.9

28.6

24.3

25.1

22.5

72.3

70.0

48.9

Source: BPS (2015, 2020); Statistics Bureau of Japan (2018: 29); KLI (2018); OECD (2020d: 24 –26).

manufacturing), which expanded considerably in the post-1945 period, has been continuously decreasing and the service sector has been increasing substantially. Even so, Japan’s secondary industry remains relatively large among OECD countries. The tertiary sector— services— now accounts for almost three-quarters of employment. As an example, education, welfare, and health care accounted for 47.5% of all employees in 2017, reflecting the growth in demand for services by an aging population. These areas of the service sector, along with wholesale and retail trade, accommodation, and entertainment, including tourism, restaurants, cafes, and bars, has generated numerous nonregular jobs. The changes in the industrial and employment structure in South Korea are similar to those in Japan, with about one-quarter of the labor force now working in manufacturing and more than 70% in services. Employment in services in South Korea nearly caught up with Japan in the 2000s, expanding from about half of employment in 1991 to over two-thirds in 2010. Although manufacturing still plays a vital role in South Korea’s export economy, the changing employment patterns show that both countries have made the transition to service economies, in which the role of manufacturing diminishes and finance, consumerism, leisure, and popular cultural industry emerge as a more significant part of the economy. Indonesia’s employment structure contrasts with those in Japan and Korea. Although the country also had more than 20% of the labor force

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in manufacturing in 2019, the striking disparity with Japan and Korea is that almost 30% of the working population remains in primary industries, mainly agriculture. Indonesia’s transition from agriculture to manufacturing has not been as significant as that experienced in Japan and South Korea. Interestingly, though, Indonesia has seen a significant movement of employment to services. In agriculture dispossession and commercialization have been significant; many farmers are engaged in capitalist agriculture through contract farming, palm oil plantations, forestry and the like (see Maxton-Lee 2018). The 1997– 1998 economic crisis demonstrated that in Indonesia the safety net for a large number of workers who were laid off when the crisis hit was their connection to land, extended families, rural villages, and agriculture. After more than two decades of change, millions of Indonesians remain vulnerable to crises. Most existing jobs are still in the lowproductivity sectors of agriculture, wholesale and retail trade, and community, social, and personal services. The World Bank (2016: 75) calculated that “most of the 20 million new jobs created between 2001 and 2012 have been concentrated in low-productivity, non-skill-intensive sectors.” In addition, Indonesia retains a large informal sector (see Chapter 4). Movement to and from work in agriculture and mobility in the formal and the informal sectors remain a feature of working life. Summary and Conclusions In this chapter we have outlined the economic development, political dynamics, and relations in the global division of labor in the three countries up to about the early 1990s. Japan, South Korea, and Indonesia industrialized at different times and in quite different contexts in terms of the development of global capitalism. Such differences meant variation in terms of national state capacities to shape their domestic institutions and influence global forces. Japan was the first to industrialize, beginning in the late nineteenth and early twentieth centuries, and it reindustrialized after World War II and in the context of the cold war. This was an era when national capitalism dominated. This meant that Japan could adopt policies that enabled rapid state-led industrialization, where some companies developed into global corporations and brands. Because Japan is a democracy, labor was soon constrained and tied to the fortunes of the companies. South Korea was the next to industrialize and was somewhat more constrained by global forces, though in the context of the cold war, it too

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was able to establish a strong manufacturing capacity. Under a military regime labor was repressed and prevented from organizing. Indonesia, as the last to industrialize, was constrained by a developed and embedded global neoliberalization. Indonesian companies were linked to global firms and were more reliant on demands from global supply chains. In addition, Indonesia’s labor was systematically repressed for the 30 years of the military-backed New Order regime. We also presented information on demographic characteristics in these countries. A marked difference is by age, with Japan’s population being the oldest and Indonesia’s the youngest. Japan also has the lowest birthrates and Indonesia the highest. In all three countries the labor force participation rates for women hover around 50%. Finally, we discussed industrial transformation. Japan and South Korea fit the profile of postindustrial economies in which the vast majority (more than 70%) of the labor force works in service industries, about one-quarter works in manufacturing, and relatively small proportions work in agriculture. By contrast, Indonesia still has a substantial portion of the labor force working in agriculture and has developed a service economy (almost half the labor force) without ever really having had a large manufacturingbased economy. The large role played by service industries in these three countries has facilitated the rise of nonregular work, as we will discuss in Chapter 4. In the next chapter we elaborate on our discussion of how the interplay between global capitalist dynamics and domestic political economy has influenced labor market and social welfare institutions and policies and contributed to the rise of precarious work in these countries.

CHAPTER 3

Global Capitalism, Domestic Policies, and Precarious Work

how neoliberal policy and the dynamics of global capitalism— including globalization of production and investment— have influenced the incentives for businesses, governments, and labor to shape employment and other work arrangements. We examine the outcomes of such processes for work and workers in Japan, South Korea, and Indonesia and argue that global forces, such as the international movement of capital, interacted with each country’s domestic political economy to shape the extent and consequences of precarious work. Thus we link differences in precarious work in our case studies to both inter- and intracountry differences. Having been dominated by the West and its companies and capital, global production patterns began to change in the 1950s. Most noticeably, Japan began to export manufactured goods following its rapid reindustrialization. By the late 1960s Japan’s corporations were competing strongly in global markets and Japanese overseas investment was growing. By the 1980s South Korea’s industrial conglomerates, the chaebol, were also entering global markets. Following the 1985 Plaza Accord, Japanese and Korean conglomerates, like American and European firms, began offshoring production. In searching for cheaper production sites, including low-wage workforces, businesses relocated production to China and Southeast Asia, including Indonesia. This brought more foreign investment to Indonesia and promoted more intense industrialization (Suehiro 2008: 3 – 4). These

IN THIS CHAPTER WE DESCRIBE

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global and regional dynamics have been described in terms of a flying geese model, which characterizes the rapid economic growth in Asia as a catch-up strategy led by the states of East Asia (K. Kojima 2000). Japan had indeed achieved economic growth by catching up to the West, directed by an active and interventionist state that promoted the export of manufactured goods and supported the development of conglomerates. Like Japan, South Korea’s economic miracle was achieved with an interventionist state that promoted an export-oriented developmental strategy and supported the expansion of conglomerates. In both countries the state protected domestic markets, strategically limiting foreign investment and encouraging the export of goods to international markets. Like Japan in the 1970s and 1980s, South Korean companies began to expand their overseas investments beginning in the 1990s. The economic transformation in Indonesia intensified following the New Order’s violent rise to power in 1965 – 1966. With a military-backed regime in power, foreign investment flowed, especially into the resources sector. Manufacturing remained small and protected, and Indonesia’s manufactured exports did not expand significantly until the 1980s. Data collected for 1980 and 1992 suggest that this expansion was spurred by foreign investment, with roughly two-thirds of that investment being in manufacturing, a pattern supported by politically connected domestic conglomerates. During the New Order, exports and the private sector became the engines of growth (H. Hill 2000: 76 – 78, 154 – 58). Indonesia’s pattern of industrialization did not produce the export-oriented firms of Japan and South Korea that are now global brands. Initially, the New Order state did not actively promote manufactured exports, but it continued to protect domestic firms, a few of which developed into conglomerates, keeping them domestically profitable. Importantly, Indonesia’s limited industrialization was based on low-wage and insecure employment. In contrast to Japan and South Korea, low-productivity services have expanded and agriculture has continued to employ millions of Indonesians. In the next section we discuss the features of neoliberalism and global capitalism. We consider capitalist dynamics in Japan, South Korea, and Indonesia and argue that globalizing capital interacts with local and national political and cultural institutions to produce differences in the balance of power between capital and labor, transforming labor markets and work arrangements. Because the three countries have distinctive political, social,

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legal, and welfare protections, the countries differ in how they responded to these global capitalist dynamics. Neoliberalization and the Dynamics of Global Capitalism Precarious forms of work in the second half of the twentieth century have been an outcome of neoliberal globalization. Although the neoliberalism that emerged in the West can be traced to the 1920s, it was in the 1970s that policy began to reflect neoliberal prescriptions, coinciding with a capitalist-class political project led by conservative parties in the United Kingdom and the United States (Slobodian 2018: ch. 1). The fall of the Eastern European communist regimes in 1989 – 1992 provided further legitimation for neoliberalism’s eclipse of Keynesian economics and associated welfare states (Jessop 2013). Neoliberalism has other labels, including market fundamentalism and the Washington Consensus (Stiglitz 2002; Williamson 1990). These have become buzzwords that describe the zeitgeist of the late twentieth century for both states and business. Neoliberal ideology and policy is composed of several diverse and contradictory ideas, but its core tenets can be identified (Gamble 2006). Neoliberalism is a collection of economic, social, and related political policies that, in practice, have been associated with markets, fiscal discipline, trade, investment and financial liberalization, deregulation and reregulation, decentralization, privatization, and a reduced but more focused role for the state (see Williamson 1990; Slobodian 2018). These elements have formed an ideological core and have been mixed and matched as policy guides to address particular circumstances. In practice, this has resulted in a limited welfare state, decentralized labor relations and the weakening of unions, and fiscal discipline taking precedence over social policies (Portes 1997: 238). Such policies were considered necessary to deepen the globalization of trade, finance, production, and investment (Slobodian 2018). The policies associated with neoliberal globalization freed capitalism from the spatial locks that had limited mobility and profitability, leading to new economic geography (Harvey 2001). The worldwide expansion of transnational corporations and production networks created global markets that have eroded national boundaries in production and consumption, weakening state sovereignty. In various ways states have ceded some control over national economies, as transnational corporations have directly affected the national economy, thus

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restricting the conventional policy measures used to govern the economy. Meanwhile, many national states have gone through processes of reregulation that have adapted and adopted neoliberal policy prescriptions to attract and maintain foreign investment. States have been able to reassert some aspects of national control during the COVID-19 pandemic, but the long-term policy outcomes of this remain uncertain. Even as global influences have increased, it is evident that the national state remains significant in shaping the jobs and incomes of workers. As D.-O. Chang (2021) has shown, transnational labor regimes associated with global production and markets have significant impacts, destroying old jobs and affecting the growth of new jobs. The implementation of neoliberal policies has produced significant economic, political, and social changes since the 1970s (Harvey 2005: 6 – 7). Among other things, these policies have pressured states and companies to dismantle the standard employment relationship (SER) in industrialized countries and to limit the emergence of SERs in developing countries. Neoliberalism became a global political and economic project in the early 1990s, as capitalists, policymakers, and policy lobbyists promoted it everywhere. The expansion of global capitalism has been accompanied by the intensification of production on a global scale, driven by the competitive search for profits and accumulation. This intensification in turn involved the application of capital, technology, knowledge, and logistics to increase international competition in product, capital, and labor markets. These structural drivers compel states, businesses, and labor to respond in a manner that enhances competitiveness and profitability in products, firms, markets, and national economies. The globalization of production and exchange has resulted in— and has been motivated by— reducing the costs of production, most notably by decreasing the total cost of labor (see Burkett and Hart-Landsberg 2000; Santoro 2000). As such, the control of labor and characteristics of industrial relations (e.g., levels of unionization, collective bargaining contexts, and state workplace regulation) are important areas that affect global investment decisions (Cooke 2001a, 2001b; see also Kleiner and Ham 2003; Chiu 2007). Neoliberalism rejects the developed-world Keynesianism of the Fordist golden age of industrial capitalism. Many of neoliberalism’s contemporary proponents believe that markets provide efficiency in economic transactions, as other forms of liberalism do, and that self-regulating markets

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ensure the best allocation of economic resources, because self-interested individuals engage in multiple and voluntary transactions that ultimately bring the greatest good to the individuals involved. In policy terms this ideological perspective demands the diminution of the state’s economic role, the transformation of its regulatory role, and a makeover of social welfare entitlements as individualized social safety nets. Neoliberal prescriptions for changing the role of the state also involve demands for reduced taxation that had funded welfare states. Where neoliberalism diverges from previous forms of economic liberalism is its global ambitions— a “global project,” as Brenner et al. (2010) have it— and in its demand for a regulatory role for the marketized state. In asserting a more limited economic role for the state, the argument is that the state should play a market-facilitating role through monetary and fiscal policies (see Robison and Hewison 2005). Neoliberals also extend the notion of market efficiency to social and political organizations (Robison 2006). The outcome is a state that can control the economy, society, and politics. Neoliberal policymakers recognize that states are necessary for regulating and disciplining societies precisely because the marketization of the economy and society leads to fragmentation, disorganization, and political challenge. Thus states are required to overcome residual commitments to collectivism and social democracy, promote productivity gains through political activism, and maintain and extend the dominance of capital over labor (see Akram-Lodhi 2006: 161). Essentially, neoliberal ideology and policy recognize that the state must serve the interests of capital through both marketization and the maintenance of the social order. Indeed, as Jayasuriya (2006: 242) points out, the need to manage conflict means that neoliberals understand that the control of the state cannot be left to market forces. Neoliberalism’s global economic project is associated with extensive liberalization and mobility of finance (Helleiner 2010). Regulation and financialization are integral to a broader process: the deepening of the internationalization of capital in trade, finance, production, and investment (see John O’Connor 2010). The ascendancy of neoliberal ideologies and policies has been facilitated by— and has, in turn, exacerbated— the weakening of labor movements in almost all developed countries (Ebbinghaus and Visser 1999). Indeed, the shift in the balance of power from labor to capital has been one of the main aims of those promoting neoliberal policies (see Harvey 2005: 14 – 31; ul Haque 2004: 6). The call for greater flexibility by employers— an

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enhanced ability to hire and fire workers and, more generally, to be able to exercise control over the labor process largely unencumbered by previously established norms, work rules, and regulations— was a political reaction by business to the previous successes of unions and labor, particularly in the West, in obtaining greater institutional protections for workers (see C. Howell 2016). Neoliberal policies and changes to collective bargaining rules that emphasize firm-level negotiations have further shifted the balance of power in favor of employers (see D.-O. Chang 2009). In many countries neoliberal policies that promote employment flexibility have resulted in unions losing members and political and policy influence. In examining the global rise of precarious forms of work, we cannot ignore the enhanced structural power of capital. Structural power refers to “the ability of business and finance to influence policy without applying direct pressure to government” (Gough 2000: 2). Because liberalization has deepened everywhere, trade and investment openness has enhanced capital’s mobility and exit options, compelling states and labor to be more responsive to capital’s needs. Yet neoliberalization has been contested and mediated by class forces and class struggle. As we will show for Japan, South Korea, and Indonesia, unions and social movements commonly oppose globalization and aspects of the neoliberal policy agenda (see, e.g., Ayres 2004; Arce 2008; Daniels and McIlroy 2008). Since the 1980s, industrialization and rapid growth in East Asia have been increasingly based on manufacturing for global supply chains. However, with the statist models of industrialization in Japan and South Korea, this process was not initially accompanied by an acceptance of neoliberal ideology and policies, with the state directing and supporting national firms (Johnson 1982). Industrialization in Japan and South Korea was characterized by state industrial policy and planning that selected and favored certain sectors of the economy. Significantly, the political legitimacy of East Asian developmental states relied on their success in promoting economic expansion and, especially, in maintaining high growth rates (H.-J. Chang 2010). Hence the economic crises of the 1990s and 2000s undermined the legitimacy of developmental states, and this accelerated the adoption of neoliberal policy in the region (see Carroll and Jarvis 2017). As already observed, although Southeast Asian states also played a key role in structuring capitalist development, these roles were different from those in Japan and South Korea. According to Jomo (1997: ch. 7), the state intervened in Southeast Asian industrialization and economic

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development, but this intervention was weaker than in East Asia and was characterized by extensive rent seeking and associated patronage. This has limited the capacity for picking winners in manufacturing, as happened in East Asia. However, economic crises in Japan, South Korea, and Indonesia marked shifts toward policies that were noticeably more neoliberal. In Japan, after decades of rapid growth, the shift to a more determined turn to neoliberal policy came after the asset price bubble collapse in the early 1990s. This led to a long period of economic stagnation during which successive governments adopted policy reforms aimed at boosting economic growth. Liberalization was extended in several areas, including employment policies and the privatization of public enterprises. The economy suffered additional economic setbacks in the wake of the 1997– 1998 and 2008 – 2009 economic and financial crises, providing additional stimuli for greater policy neoliberalization. An important juncture for promoting neoliberal policies in South Korea and Indonesia was the 1997– 1998 Asian economic crisis. When that downturn engulfed the Korean economy, the won plummeted as investors fled to safer havens and companies collapsed. The crisis coincided with a shift of political power from an authoritarian to a democratic regime at the same time that the International Monetary Fund (IMF) was preparing and providing a bailout. The IMF’s diagnosis was that Korea’s stateled capitalism had failed, and it tied bailout funds to extensive neoliberal economic reforms, including increased labor market flexibility, deregulation, privatization of state enterprises, and corporate governance reforms targeting family-owned and family-controlled chaebol. In Indonesia the 1997– 1998 crisis was especially deep, with international institutions also blaming local business practices— in this case, cronyism. The outcome was also a dual political and economic transition. First, with high rates of unemployment and the collapse of large sections of the economy, neoliberal policies were quickly adopted, as demanded by the IMF, the World Bank, and bilateral donors. Second, as in South Korea, the economic crisis created the conditions that led to a transition from authoritarian to democratic politics. After three decades in power President Suharto’s military-backed New Order regime was removed. The resulting processes of democratization and decentralization were overlaid with policies promoting marketization and liberalization. The economic impacts of the 1997– 1998 economic crisis varied across the region. As Figure 3.1 shows, among the three countries, Indonesia saw

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15.0 10.0

Percent

5.0 0.0 -5.0 -10.0 -15.0

1965

1970

1975

1980

1985 Indonesia

1990 Japan

1995

2000

2005

2010

2015

Korea

F I G U R E 3 . 1. Economic growth rates in Japan, South Korea, and Indonesia, 1960 – 2017. Source: World Bank (2020b); and OECD (2020b).

the deepest declines in growth from the crisis. In contrast, since the 1970s, Japan had been susceptible to downturns and was already in an economic slump in 1997. Japan was most affected by the 2008 global financial crisis. The Japanese economy tumbled again on March 11, 2011, when the Great Tohoku Earthquake off the northeastern coast of Honshu set off a tsunami that led to a major nuclear accident at the Fukushima nuclear power plant. As already noted, the early 1990s saw the rapid rise of global production networks (GPNs) that drew capital to East and Southeast Asia and saw Japanese and Korean firms making subcontracting arrangements in several Southeast Asian countries. These GPNs incorporated cheap labor and flexible labor practices, which some analysts emphasize are essentially coercive processes (see D.-O. Chang 2006a). Those networks demand that supplier firms compete for investment, whereas workers must compete for jobs in less regulated labor markets. States too have become involved in promoting this competition, striving to attract footloose capital by advertising their ability to provide a competitive investment environment— as the World Bank (2020a: 17) explains it, the “ease of doing business,” including state efficiency when dealing with business, deregulation, and limited regulation on employing and terminating workers. Invariably this state pitch includes declarations about disciplined cheap or skilled workers along with deregulation, low tax regimes, and access to raw materials, components, and markets (R. Baldwin 2013). Such has been the extent of the adoption of such measures that they are now viewed as being essential and even “natural” policies. Individual states also compete with regulatory innovation in labor markets. Indeed, labor market policies are regularly measured for their

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flexibility and business friendliness, as evident in the World Economic Forum’s (2011) Competition Index. In domestic labor markets, collective bargaining is seen as market distorting, and so states have sought to limit it. Regulated benefits, worker protections, and national labor laws are identified as rigidities and costs to be contained or dismantled, often in the name of generating employment. Importantly, employers also adopt firmand industry-level practices that constrain union activity and reduce collective bargaining. These measures include coercion, often backed by the state; legal actions against unions, labor leaders, and workers; the creation of company unions that are effectively vehicles for management interests; and the bribing of union and state officials. The result is often a “flexibilization regime” that encompasses deregulation and reregulation and covers all aspects of production and employment relations (Tjandraningsih and Nugroho 2008: 1– 2). Such regimes do not require state deregulation as much as new forms of reregulation and institutional arrangements that promote competitive, productive, orderly, and flexible labor markets. In these processes states and capital converge in measures that require a thoroughgoing commodification of work, resulting in the advance of precarious work. From the mid-1990s to the late 2010s the processes described here have been pressure-cooked in an era of hyperglobalization. Hyperglobalization, Production, and Investment The implementation of neoliberal policies in a context of enhanced globalization— or hyperglobalization, a term introduced in the mid-1990s— has provided a framework for capitalist production to disengage from the spatial locks of the period of embedded liberalism and standard work. By hyperglobalization we mean the dramatic acceleration in the scale of global economic, cultural, and political interconnections (Rodrik 2011). Neoliberal policy innovations are responses to the demands for free(r) trade. This means that global trade agreements impinge on and limit domestic economic and social policies. Under hyperglobalization investment rapidly expanded, which led to further globalized production as businesses engaged in a relentless search for production sites that would provide cost reductions and thus higher profits. States have been forced to engage in competitive cost reduction in GPNs, especially by lowering the price of labor (Humphrey and Schmitz 2001: 12). Hyperglobalization is linked to a range of developments, including the collapse of Eastern European state socialism, the revolution in

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information technology, and the formation of regional blocs, such as the European Union and other free trade regions. More recently, the integration of China into capitalist markets since 1978 has reshaped the global division of labor, because China has emerged as the world’s factory. Hyperglobalization has involved the further deregulation of market transactions in domestic and global markets, accelerating the cross-border mobility of commodity, capital, labor, and technology. The opening of new markets and the advancement in digitalization and communications mean that the velocity of capital mobility across borders has also accelerated, undermining the ability and capacity of market regulation by nation-states. The formation of a global economy where capital has been able to move increasingly freely and rapidly across national borders has transformed the old world system that characterized the period of the cold war, even if this trend has been slowed by the COVID-19 pandemic. Hyperglobalization has heralded deeper global competition, doublingdown on the pressure exerted on business to further reduce costs— seemingly sparking an even greater race to the bottom in capital’s globalized search for low-cost labor and ever cheaper production sites. As a result, global brands have outsourced their production, often to multiple sites, meaning that various products traded across borders are often the components that become assembled as finished commodities. With neoliberal policy and hyperglobalization, global cross-border capital flows have grown enormously, from $1.4 trillion in 1995 to $12.4 trillion in 2007. Following the global financial crisis, the rate of growth of these flows was reduced to an annual average of $7.1 trillion between 2008 and 2016 (McKinsey Global Institute 2017: 1). One result of this growth is that the estimated total stock of gross foreign liabilities increased from $15 trillion in 1995 to $132 trillion by 2016 (McKinsey Global Institute 2017: 82). According to the United Nations Conference on Trade and Development, annual foreign direct investment (FDI) inflows have increased by more than 50%, from just under $916 billion in 2005 to $1.43 trillion in 2017. In Asia the increase was from just under $200 billion in 2005 to $476 billion in 2017, a more than 70% expansion (UNCTAD 2008: 299 – 301, 2018: 184 – 85). Global merchandise trade has increased from $10.5 trillion in 2005 to $17.7 trillion in 2017, and trade in commercial services has increased from $1.3 trillion in 2005 to $5.3 trillion in 2017 (WTO 2018). In other words, despite the slowdown associated with the global financial crisis of 2007– 2008 and the contraction with the COVID-19 pandemic,

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global trade, investment, and production have expanded enormously since the early 2000s. Reflecting these developments, global value chains now span and link the world in myriad ways and have reshaped relationships among businesses, states, and labor. Although this means that global capital flows and production are increasingly deterritorialized, states and labor exhibit considerably more “stickiness.” As the ILO explains: Recent globalization trends have been characterized by the greater integration of global markets for goods, services and capital across borders while their impact on the cross-border movement of people and labour remains much more restricted, regulated by immigration laws and policies that uphold the principle of state sovereignty. (ILO 2007: 1)

In short, globalized capital demands numerous flexibilities from governments and labor as states are forced to establish the best conditions for FDI, ensuring their policy, legal, and investment climates offer multiple incentives for investors. Workers have always had to compete against each other for jobs. In a neoliberal world, as already noted, collective labor solidarity is seen as a limit on capital. Indeed, in the late-developing countries of Asia, capital’s need to control and subordinate labor has been helped by state interventions, which for long periods have aimed to repress, undermine, or strictly limit labor’s collective capacity (see Hewison and Rodan 2012). Yet, as a collective worker, labor is inserted into markets and joins states and businesses in the competition for investment by increasingly mobile capital, circling the globe in search of profit. Being subordinate to capital and the state, the collective worker is disciplined, controlled, and, increasingly, disorganized; indeed, the demobilization and disorganization of labor is a feature that adds to a location’s competitiveness (Bryan 1995). Businesses take advantage of limited and poorly implemented national labor laws and make good use of the state’s coercive powers to limit the organizational capacity of labor. In Asia, employment policies also maintain a large reserve army of labor in the informal sector that helps to control workers employed in the formal sector. Informal sector workers are viewed as a threat to those employed in formal sectors, making them feel that their employment is precarious and that they are easily expendable (see Wong 2006). Labor’s dilemmas are exacerbated by firms adopting enterpriselevel and industry-based employment practices that further constrain

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collective organization. These practices take numerous forms, including outright coercion, physical attacks on rank-and-file workers and union leaders, and the undermining of unions by establishing competing company unions that are effectively arms of management (see D.-O. Chang 2006b). At the same time, the flexibilization of production has involved the use of putting-out systems, in-house contracted labor, competitive work teams, and migrant workers (see Arnold 2006; D.-O. Chang 2006b; Won 2007). These elements of flexibilization effectively amount to the application of a market model to human resources management (D.-O. Chang 2006a: 32). As ul Haque (2004: 6) has shown, the outcome has been to “weaken labour and strengthen capital.” Indeed, this undermining and weakening of labor collective capacity has been one of the main aims of neoliberal policy. This asymmetry of power, tilted ever more to capital, has much broader impacts. In Griffith Cohen’s (1997) memorable framing, this power imbalance and the conjuncture of capital’s need for increasingly flexible working arrangements alongside the state’s interests in containing labor have led to “vampire capitalism.” In this conception the claimed inevitability of the market as a natural regulator of economic and social life drains the life from workers through the exploitation of both human and natural resources and through reduced welfare, inequality, unemployment, and low and stagnant wages. For those who benefit from this system, sweeping away the rigidities of the labor market produced by collective bargaining and worker protections, in the name of increased flexibility, enhances capital’s control over labor and increases profitability. As several analysts have shown, reducing the precariousness of work and life is a goal that has existed since the beginning of paid employment in capitalist economies, with organized labor long struggling to reduce uncertainty and risk and to secure improved working conditions (see James O’Connor 2009: 93). That uncertainty for workers has been reintroduced with such vigor is a testament to the increased power of capital over labor, reflecting the fact that the era of hyperglobalization differs from previous epochs of capitalist globalization in at least four important ways. First, the spatial restructuring of production on a global scale makes it relatively easy to move goods and capital across borders. This has freed employers from previous temporal and spatial constraints, allowing them to more easily locate and relocate their business operations in search of cost savings and higher profitability. Moreover, advances in

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information and communication technologies have allowed capitalists to exert greater control over decentralized and spatially dispersed labor processes. Second, hyperglobalization has also been associated with a “dematerialization” of trade with the rise of trade in services (Subramanian and Kessler 2013: 5). This global transformation is mirrored in national workforces being increasingly dominated by employment in services, both traded and domestic. Third, although layoffs or involuntary terminations from employment have always been a part of work and have fluctuated with the business cycle, these have now become an even more important component of employers’ restructuring strategies to increase short-term profits by reducing labor costs and undermine workers’ collective power. Finally, whereas precarious work was previously conceived in terms of a dual labor market, with unstable and uncertain jobs concentrated in a secondary labor market, hyperglobalization and neoliberal policy mean that precarious work is now more pervasive and generalized. Even workers who continue to work full-time with their employers under standard workplace conditions have found their employment to be much more precarious and insecure. In mid-2021 the impact on hyperglobalization of the advent of trade wars and the COVID-19 pandemic remains unclear. The slowdown in global activity caused by these political and health developments have led some to suggest that the age of hyperglobalization may have come to an end. Others suggest that these events portend a further restructuring of globalization (see Fontaine 2020; Altman 2020). Global as Local: Domestic Policies in Japan, South Korea, and Indonesia In terms of the development of hyperglobalization and its impacts, each of the country case studies illustrates how the neoliberal policy turn has led to a rise in precarious work and precarious lives. This common trend and the distinctiveness of responses are mediated by different histories, politics, levels of economic development, demographics, gender relations, and other sociocultural factors. These common patterns and important divergencies are evident in employment relations and other work arrangements in these three countries. The policy responses to hyperglobalization and the escalation of precarious work also vary in their form and content, depending on the interactions between the state, capital, labor, and civil society in our case studies.

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Japan

In the 1970s the Japanese economy was considered successful, and its firms were capable of successfully competing with those in the West (see Vogel 1979). Yet by the 1990s stagnation had set in. The 1985 Plaza Accord sought to reduce the United States’ current account deficit by having Japan revalue the yen against the dollar. The strengthened yen had recessionary effects for Japan’s export-oriented economy, leading the Bank of Japan to adopt expansionary monetary policies. This led to speculation and the asset price bubble of the late 1980s, with stock and urban land prices tripling between 1985 and 1989 (see Saxonhouse and Stern 2004). As a result of these exchange rate changes, a long period of economic stagnation began in the 1990s, with Japanese firms losing competitiveness. They responded in two ways. First, companies began to move laborintensive manufacturing facilities overseas to low-wage countries, initially to Southeast Asia and then to China. Japan’s manufacturing production with overseas affiliates was only 3% of the total manufacturing production by Japanese enterprises in 1985; by 1998 it had increased to 13.1%, peaking at 25.3% in 2015 (METI 1999: 9, 2017: 6). Japan soon became the world’s largest source country for foreign investment, with Prime Minister Nakasone claiming that the strong yen showed Japan’s growing stature in the international system (Funabashi 1989: 91– 92). This relocation of production affected the domestic labor market, as the manufacturing sector’s contribution to GDP declined, as did the employment of workers in the manufacturing sector (Huijie 2018). The corollary of deindustrialization in Japan was industrialization in Southeast Asian countries and in China. By 2011 more than 60% of Japanese affiliates were in the Asian region, with 30.5% operating in Southeast Asia (METI 2011). For example, in 2017 Japanese companies reportedly generated 18.3% of Indonesia’s total exports and employed 4.7 million workers in 1,500 Japanese firms (Sulistiyono 2017). Second, Japanese companies began to transform their domestic lifetime employment system. The relocation of labor-intensive companies was a way to lower the high costs of lifetime employment by reducing employment in Japan and the long-term financial commitments these required. As will be seen, companies also expanded their use of nonregular workers, with the proportion of nonregular employees growing from the 1980s to the 2010s. In the 1990s and the 2000s government deregulation committees (without labor representatives) responded to calls from employers and economists for enhanced labor market flexibility. The result

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was a deregulation of the employment system (Imai 2011: 59 – 77; Jung and Cheon 2006). Although the Democratic Party tried in the late 2000s to limit rising nonregular employment, this was short-lived, because the long dominant Liberal Democratic Party regained power in 2012 and continued the flexibilization trend. Thus deindustrialization, industrial hollowingout, and the rise of nonregular employment emerged to dominate the Japanese economic landscape in the late twentieth and early twenty-first centuries (Iyoda 2010: 81– 94). South Korea

South Korean dirigisme was challenged by both political democratization and deepening globalization. A decade after popular demonstrations ended military-backed authoritarianism in 1987, the government began changing its role in markets, altering the long-established relationship between the state and business. This process was reinforced by South Korea’s membership in the OECD in 1996. When the Asian economic crisis reached South Korea in December 1997, the country was vulnerable to the advance of neoliberal policies. The crisis hit South Korea particularly hard because the chaebol had expanded their production capacity by borrowing internationally, with such loans being implicitly guaranteed by the state through a fixed exchange rate. When the crisis hit and the won was drastically devalued, the chaebol were in a perilous situation, and banks— many of them state-controlled— were left holding large portfolios of nonperforming loans. The military-dominated state had long supported the chaebol, fostering a view that they were too big to be allowed to fail. And because state-controlled banks and debt financing from those banks were so important for the growth of corporations, collusion between political elites and business leaders was a crucial feature in the success of business, at least until the crisis (Kalinowski 2009; Y. T. Kim 2008; E. M. Kim 2017: 117– 18; P.-S. Lee 2000). However, with the onset of the crisis, alongside membership in the OECD and IMF bailouts, the government faced a dire situation. Many of the chaebol suffered severe financial downturns. A shortage of dollars engulfed South Korea as international banks withdrew their investments and called in the loans from the chaebol. With more than half the conglomerates bankrupt, the state was unable to bail them out. The IMF bailout came with strict conditions that amounted to demands for quite radical neoliberal reforms, including liberalizing financial markets, privatizing state firms, and deregulating the labor market (IMF 1997).

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There were huge layoffs during the crisis, with the unemployment rate increasing from 2.7% in November 1997 to 8.8% in February 1999 before falling back to 3.1% in September 2001. Mass unemployment was reduced, but this was achieved through the rapid expansion of nonregular employment. The proportion of nonregular employment increased from about 27% in 2002 to 37% of the workforce in 2004 (KLI 2006). This growth of nonregular employment in the depths of the crisis had its origins in the Tripartite Committee formed in January 1998, which consisted of representatives from labor, capital, and the government. As extensive liberalization proceeded under the IMF’s strictures, inbound and outbound FDI sharply increased. Outbound FDI, which had been temporarily interrupted because of the crisis, began to grow again in 1999 as liberalization of FDI was complemented by the deregulation of trade and by mergers and acquisitions that helped to promote capital mobility. Attracted by the lower labor costs, South Korean companies began to transfer their production facilities to China and Southeast Asia. Although a devalued won was a drag on investment, FDI to the United States and Europe was also considered necessary to avoid trade barriers. Capital mobility and new investment in other countries with abundant cheap labor were ways to avoid tariff walls and reduce production costs. The upsurge of outbound FDI accelerated in the 2000s, dominated by those chaebol that had survived the crisis. The total amount of outward FDI increased from $4.12 billion in 2003 to $23.13 billion in 2007 and rose to $618.47 billion in 2019. In this period annual outward FDI regularly exceeded inward FDI, with large investments in information technology, the motor industry, and natural resources. More than half of the outward FDI was oriented toward China and Southeast Asia (Statistics Korea 2020a). The largest recipient country was China, followed by Vietnam and Indonesia. Consequently, the proportion of offshored production relative to the total exports from South Korea increased from just over 27% in 1995 to 48% in 2008 (J.-Y. Lee 2018: 25). Even though Korean industrialization has been comprehensive, as will be elaborated in later chapters, the economy has continued to have large numbers of self-employed workers, especially in the service and agricultural sectors. These self-employed workers constituted more than onefourth of the workforce in 2018. Often, the self-employed are retirees who are unable to find jobs, and they do not have sufficient savings or productive assets. The self-employed compose a substantial part of the precarious

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working population, and their economic status is similar to nonregular workers in terms of economic insecurity and uncertainty. Indonesia

Like South Korea, the economic turning point in promoting neoliberal policies in Indonesia was the 1997– 1998 crisis. In 1998 the economy contracted by 13.1%, the rupiah fell from 2,600 to the U.S. dollar to around 15,000, inflation reached 72%, the stock market fell by about 85% in U.S. dollar terms, and wages fell sharply (H. Hill 2000: 264 – 70). Using the World Bank’s $1.90 a day poverty line, the percentage of the population living in poverty increased from almost 44% in 1996 to more than 63% 1998 (World Bank Open Data). The social impacts were dire, with millions losing their jobs. The unemployed flooded the informal economy, eking out a living. The largest employment declines were in the service sector, where employment was already precarious. Even though agriculture had undergone significant changes, with increased commercialization and a concentration of landholdings in many parts of the country, urban workers who lost their jobs and retained rural links returned to the agricultural sector. Faced with capital flight and the collapse of the economy, the struggling and reluctant Suharto regime was forced to turn to the IMF for a bailout. The economic crisis also led to the political unrest that brought an end to the New Order regime, which was defeated by both the economic recession and a nationalist rejection of the IMF’s demands for deregulation and neoliberalization. The economic decline was attributed to the New Order regime and its cronyism, and the IMF’s reform agenda was blamed for worsening the negative impacts of the crisis. Identified by some as neocolonial, the IMF’s demands and austerity measures resulted in widespread anti-IMF sentiment among elected politicians and the bureaucracy and in street protests (Bahagijo 2005; Ambrose 2007). By the middle of May 1998, with demonstrations in cities across the country and with students occupying the parliament building, Suharto resigned. The reformasi era that followed the three decades of authoritarianism is characterized by two key elements of reformation: democratization and decentralization. Despite opposition and distrust, the IMF played a significant role in both processes through its bailout, supported by other international financial institutions and bilateral partners. The demands of these institutions and partners were for enhanced economic liberalization, pressing Indonesian policymakers to more fully embrace markets.

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However, this liberalization was extended beyond the economic sphere to the social and political spheres and had important effects on many, including workers. Indonesia remained under IMF supervision from 1997 to 2003, during which time there was significant institutional change, including constitutional reform, decentralization that made local government more significant, new laws on the independence of the central bank, reduced national planning, and legal limits on the state’s budget deficit (H. Hill and Shiraishi 2007: 128 – 29). Maintained by elected governments, this neoliberal policy agenda also included a deepening of the internationalization of trade, finance, production, and investment (Feridhanusetyawan and Pangestu 2003). Foreign investment increased, with negative net flows in 2003 of more than $25 billion flowing to Indonesia in 2014. Internationally, hyperglobalization drove the growth in FDI. Domestically, the government provided incentives and stimulus packages that emphasized Indonesia’s business-friendly environment: law and order, business certainty, tax cuts for exporters, reduced energy tariffs for labor-intensive industries, tax incentives for investment in special economic zones, and lower property taxes. Much of this FDI was in the mining sector; machinery and electronics; electricity, gas, and water supply; and the chemical and pharmaceutical industries. As Indonesia’s policies fell into line with the global trend toward neoliberalization, the country became more deeply engaged with GPNs and the state promoted a flexibilization regime over aspects of production and employment relations (Tjandraningsih and Nugroho 2008: 1– 2). PostSuharto governments enacted new regulations and institutional arrangements that promoted competitive, productive, and flexible labor markets. Even though trade unions and collective bargaining were made legal, the regulatory and institutional changes suited business and limited the capacity of unions to protect workers. Initially, workers joined unions, but membership soon declined (Ford 2010). In any case, unions mainly dealt with the minority who worked in the formal sector (Lane 2019: 1). Even there, collective bargaining remained limited, and though minimum wages increased, most workers did not benefit. The trend of a movement of workers out of agriculture and into industry and services rebounded after the crisis, but in these sectors work remains precarious, with few workers having any kind of written contract. Most Indonesian workers are own-account workers, self-employed workers, casual workers, and unpaid

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workers. These categories dominate in agriculture, construction, transportation, services, and retail and wholesale trade. Summary and Conclusions We have examined how the dynamics of capitalism in Asia have played out in the different institutional and cultural features of Japan, South Korea, and Indonesia and have led to the rise of precarious and nonregular work arrangements and the erosion of social protections in these countries. Hyperglobalization and the associated neoliberalization promoted significant change in the employment relations and work arrangements in both developed countries and developing countries. Japan experienced a transformation of employment relations as a result of the prolonged recession since the 1990s. To cope with this recession and intensifying global competition, the Japanese state introduced policies to enhance flexibility in the domestic labor market. South Korea and Indonesia experienced economic crisis in 1997– 1998 and political change. Under pressure from international financial institutions, new governments in all three countries pursued neoliberal economic policies that included market deregulation, privatization, labor market flexibility, and the opening of financial markets. Alongside the global trends in neoliberal policy, the relocation of production, and capital mobility, precarious work has become more significant in most economies. However, the forms and nature of precarious work vary according to the location of a country in the global economic system, its level of industrialization, the nature of its labor markets and regulatory environment, and its historical relationships between labor, capital, and state. These forces combine to structure variations in the extent of precarious work and responses to it. Even the way that precarious work is perceived and defined follows these variations. For example, in South Korea and Japan precarious work is primarily defined by working hours, length of employment contract, and work relationship in the formal sector, whereas in Indonesia precarious work is defined more by whether one works in the formal or the informal economy. Various types of nonregular work increased as international financial institutions, foreign investors, and domestic business demanded the deregulation and reregulation of labor markets, exacerbating inequality and increasing poverty rates. Neoliberal reforms led by the still relatively strong states of Northeast Asia have thoroughly transformed the labor market, generating new forms of nonregular employment and creating a

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group of working poor. In Southeast Asia, which industrialized through vast foreign investment, the policy impacts transformed labor relations that had been dominated by authoritarian regulations and defined by weak unions and large informal and agricultural sectors. There, too, new forms of nonregular employment have expanded under the effects of neoliberal policy innovations. In all three countries nonregular work arrangements have increased, and these arrangements are associated with fewer economic rewards and social protections. It is the linkage between social protections and standard and nonregular work arrangements that is at the heart of the problems caused by precarious work. Even standard work arrangements can be precarious, though, if these are degraded by reduced legal and social protections. In the next two chapters we document the rise and consequences of precarious work in Japan, South Korea, and Indonesia.

CHAPTER 4

Dualisms of Precarious Work Nonstandard Work, Informal Economy, and Self-Employment

played out in different historical, institutional, and cultural environments in Japan, South Korea, and Indonesia, gave rise to different forms of precarious work. In Japan, where lifetime employment was once the norm, the distinction between those in regular and nonregular work has important consequences for gender and family: T H E DY N A M I C S O F C A P I TA L I S M I N AS I A ,

Studies show that, due to economic insecurity, women are loathe to marry furı¯ta ¯ [nonregular workers], and male irregular workers are half as likely as regular workers to get married. Those in a position to have what once constituted the social contract of postwar Japan— hard work today tied to marriage, home, and progressive prosperity for children tomorrow— tend to be limited to those with regular employment. (Allison 2013: 33)

Precarious work also has gendered patterns in South Korea, where 52.7 percent of working-aged Korean women . . . participate in the workforce, compared to 74.7 percent of men. For a country that is facing demographic decline . . . the absence of nearly 50 percent of women from the workforce means the economy will very soon face a severe shortage in workers who could play a vital role in sustaining and growing the economy. . . . Many of the women who re-enter the workforce

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during or after raising a child participate in non-regular employment: short-term contracts and part-time work. (Draudt 2016)

In Indonesia precarious work is linked with informal employment and inequality. The characteristics of the informal economy are lack of protection for non-payment of wages, retrenchment without notice or compensation, unsatisfactory occupational health and safety conditions and an absence of social benefits such as pensions, sick pay and health insurance. . . . Migrants, women and other vulnerable groups who are excluded from other decent job opportunities have little alternatives . . . but to take informal, low-quality jobs available in rural and urban areas in Indonesia. (Nasir 2020)

As set out in Chapter 1, precarious work encompasses three dichotomies or binaries. For Japan and South Korea the discussion and official reporting of precarious work is discussed primarily in terms of nonregular work. For Indonesia the discussion revolves around jobs without a contract and work in the informal sector. And in both South Korea and Indonesia the self-employed are also generally regarded as precarious workers. Nonstandard work, informal sector work, and self-employment are precarious because these categories generally denote work that lacks legal and social protections and so such workers bear most of the risks of work; hence these forms of work are often insecure, unstable, and uncertain and are associated with relatively low wages. Moreover, as outlined in the Introduction and Chapter 1, the deregulation of labor markets and the erosion of worker protections have made even standard or regular work more precarious, as employers have obtained greater flexibility in their relationships with their workers and so many of the rights and protections previously available— at least to male workers in large companies— have been removed or have become scarcer. We discuss how the various forms of precarious work are related to economic inequality, social protections, and poverty in Chapter 5. In this chapter we provide empirical evidence on our assertions about these dual forms of precarious work in Japan, South Korea, and Indonesia. Using macrolevel statistics and microdata from national labor surveys for each country, we identify trends, similarities, and differences in the various types of work in the three countries. Our focus is primarily on nonstandard or nonregular work, as this form of precarious work has been

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the main focus of discussion of the transformation of work in Japan and South Korea. We show that nonstandard work arrangements and informal work are gendered, as women in the three countries are more likely to be confined to precarious work arrangements. We also look at the opportunities that people have for moving from nonregular to regular work in the three countries. Standard and Nonstandard Work Arrangements Waged work has been a primary source of the income necessary for the livelihoods of most people in the capitalist economies of Japan, South Korea, and Indonesia. Thus the transition from school to work has been an essential life-course event, affecting family formation and the well-being of households. As we have discussed, the normative form of the employment contract in large companies in Japan and South Korea after World War II was a standard employment system in which workers had a secure job with an employer and the work was done full-time, full-year, on the employer’s premises, and under the employer’s supervision. Regular workers enjoyed extensive statutory benefits and entitlements and had the expectation of being employed until retirement age. Such arrangements were usually limited to men and to large companies. Nonstandard or nonregular work arrangements depart from these normative standard employment relationships (SERs). Although linking nonregular work to departures from an SER might be reasonable when considering advanced capitalist democracies such as Japan and South Korea, this view is limited historically and cross-nationally. The SER was never the modal work arrangement in any society at any time; in most parts of the world the SER was seldom more than an aspiration. In the advanced industrial countries, even in the Fordist era, most work relations were outside the SER, excluding large groups of the population such as women and immigrants, and were predicated on the assumption of a male breadwinner– female homemaker model of the family (Neilson and Rossiter 2008; Kalleberg 2018). Moreover, in Indonesia the SER has only ever been available to a small group of workers. Nonstandard or nonregular work arrangements depart from the SER in several ways. In nonstandard work administrative control over the employee is often maintained by another organization (such as a temporary help agency or a contract company) and there is no expectation of continued employment with any single employer. Nonstandard work

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arrangements are often equated with work that is contingent on the employers’ needs and preferences (see Kalleberg 2000). Nonregular work tends to be concentrated in certain sectors of the economy, which can be defined in terms of occupational, industrial, and organizational differences. In Japan, South Korea, and Indonesia nonregular employment is concentrated in the service sector. In South Korea and Indonesia nonregular workers are concentrated in agriculture, construction, and transportation. The pattern in Indonesia is complicated by the large informal economy, especially in agricultural work. Because this sector supplies a large proportion of jobs, the vast majority of them are nonstandard. But nonregular work arrangements are not limited to Indonesia’s informal sector; short-term employment is commonly used in both the formal and informal sectors and employers avoid employment contracts. In 2015 the use of short-term contracts was highest in the service sector (up to 65%) but was also seen in the manufacturing sector (more than 40%). The distinction between standard and nonstandard work arrangements recalls the divisions proposed by institutional economists who advocated the dual labor market theory in the 1960s and 1970s as a means to denote segments of the labor market that were characterized by, on the one hand, well-paying, relatively secure jobs associated with opportunities for upward mobility in large firms and, on the other hand, relatively insecure jobs linked to low-wage employment and the absence of job ladders and opportunities for advancement to better jobs (see Doeringer and Piore 1971). Japan has a long tradition of dual labor markets, where a protected group of “insiders,” or core workers, enjoy long-term contractual relations and relatively high levels of security and those without such employment and benefits— the “outsiders”— are generally employed in nonregular jobs with relatively few protections (Andrew Gordon 2017). This type of organizational dualism increasingly characterizes South Korea. It is also seen in Indonesia for a quite small, formal core sector dominated by government employment and the manufacturing sector. Because they result from actions by firms and governments in response to heightened competition associated with globalization, many of the forces behind changes in work arrangements are similar in Japan, South Korea, and Indonesia. In all three countries these arrangements are designed to cut costs and enhance labor market flexibility. Yet differences regarding the types and nature of precarious work are evident because of

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the countries’ different levels of industrialization and the policy processes associated with hyperglobalization and neoliberal policies. In Japan and South Korea the economic slowdown and crisis produced significant pressures to dismantle the SER where it was embedded, especially in large firms. Many of these pressures were associated with the globalization of production, with issues about the control of labor and unionization, collective bargaining, and state workplace regulation becoming important drivers of global investment decisions. States, business, and labor were encouraged to respond to these changes through enhanced competitiveness and profitability, including wage cost reductions. Nonstandard work arrangements pose problems for workers because they pay relatively low wages and are usually not associated with basic social welfare protections, which are often delivered through employers in Japan, South Korea, and Indonesia (see Chapter 5). The uncertainty, instability, and insecurity of nonstandard jobs also have widespread consequences for a variety of non-work-related individual outcomes, such as higher mental stress, poor physical health, and greater uncertainty about educational choices. For families nonstandard work arrangements may negatively affect marriage and childbearing. They also affect social processes, such as reduced community integration and greater disinvestment in local institutions. The quality of nonstandard jobs should be judged in relation to the job quality of SERs. Although nonstandard work arrangements typically have fewer social protections, wages, and benefits and more insecurity and uncertainty than standard work arrangements, these features of low job quality are also increasingly found in SERs. For example, attempts by Japanese employers to obtain greater flexibility with respect to their regular workers by implementing various government policies of deregulation have enabled companies to introduce contingent pay policies, such as payfor-performance and management-by-objectives, whereby compensation is tied to the achievement of particular performance indicators. These compensation practices have frayed the links between seniority and wages in large corporations and weakened the notion of lifetime employment and the psychological and social contracts between regular workers and their employers. Deregulation of working time and employment protections has also made regular work in Japan more diverse than that implied by a simple duality of job quality between standard and nonstandard work

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arrangements and has made both types of work arrangements increasingly precarious (Watanabe 2018a). Trends in Nonstandard Work: Evidence and Explanations Nonstandard work has been increasing in Japan and South Korea, and this kind of work has remained the dominant mode of employment in the formal sector in Indonesia. In Japan the percentage of nonregular workers in the labor force has increased since the mid-1980s. In South Korea the percentage of nonregular workers in the labor force expanded after the 1997– 1998 crisis. South Korea also has a relatively large number of selfemployed people, with these workers having limited access to benefits and protections. Since the 1990s in both Japan and South Korea, nonregular employment across the formal and informal sectors has increased rapidly (see Machiko Osawa et al. 2013; K.-Y. Shin 2013). In Indonesia nonregular work predominates, even in the formal sector. The World Bank (2016: 79) has estimated that more than 80% of workers in Indonesia do not have a contract, even when they are in the formal sector, and this seems congruent with OECD data that suggest that more than 90% of the workforce is in the informal sector (OECD 2019a, 2019c) (see later discussion). Women are most likely to be nonregular workers in Japan, South Korea, and Indonesia. In Japan the gender division is strong and persistent in the labor market, and the feminization of part-time work testifies to the continuing strong influence of patriarchal ideology. However, in the 1990s increasing numbers of male workers also became nonregular. Previously these workers would have expected to be employed as regular workers in the core workforce, but they have been increasingly shunted to the more disadvantageous periphery. In South Korea the proportion of women in nonregular work is almost twice that of men age 30 and older. Data from Indonesia also indicate that the proportion of jobs in informal employment shows considerably less variation by gender. However, unlike Japan and South Korea, it is men rather than women who are more marginally likely to be in informal employment, except in one significant category: unpaid workers. Almost a third of women are in this category. In the remainder of this chapter we provide evidence for these descriptions of nonregular work and other departures from the SER. The incidence of and trends in nonregular work in Japan, South Korea, and Indonesia are explained with reference to labor market institutions that reflect worker power (e.g., union density and collective bargaining), government

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policies, such as employment protection laws for regular and nonregular workers, and active labor market policies that are linked to unemployment insurance and provide support to workers as they seek to transition back into jobs after being unemployed. This is related to the training systems in these countries, such as whether job-relevant training is organized by the government or by employers. We emphasize both the macrolevel factors that shape labor market institutions and the political factors within countries that affected them. Japan

Japan has long displayed dualisms in work, with the labor force divided by employment status, gender, and age. As mentioned, lifetime employment developed in the postwar period, mostly in big companies. Lifetime employment was the cornerstone of the employment system and was characterized by guaranteed job security until retirement and a seniority-based wage system (Abegglen and Stalk 1985). This model meant that mandated social insurance benefits were for regular workers. This system is being transformed by the dynamics of global capitalism (Andrew Gordon 2017). As already discussed, the Japanese economy began to change after 1985. In response to changes brought by the Plaza Accord, the government began to alter the rules governing employment relations and practices. Later, a stubborn economic torpor created incentives for businesses to modify the lifetime employment system by hiring more temporary workers, lowering costs for the employer. Thus, for the past three decades, Japan has experienced ongoing government-initiated policy changes and business strategies designed to address the changing economic environment, reinvigorate the economy, transform the employment system, reduce business costs, increase investment, and boost growth and competitiveness. In fact, though, for all the change, economic stagnation has endured. In addition, Japanese companies have faced increased competition from companies in South Korea and Taiwan and, more recently, China in global markets (Watanabe 2014). Japanese companies began using temporary workers dispatched by staffing agencies during the early 1980s. Even then, the justification was to reduce labor costs and enhance employment flexibility. Although the Employment Security Act, legislated in 1968, had prohibited companies from using workers dispatched by third parties, companies were able to circumvent the legislation. In 1985, seeking to promote competitiveness,

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Worker Dispatching Act Timeline, Japan, 1985 –2018

Time

Action

Number of Occupations Permitted or Other Change

July 1985

Legislated

13 occupations

9 months

June 1986

Enacted

16 occupations

No change

June 1996

Amended

26 occupations

1 year

June 1999

Amended

All occupations except 5

No limit for 26 occupations; 1 year for other occupations

March 2004

Amended

All occupations except 4

No limit for 26 occupations; 3 years for other occupations

December 2009

Stricter rule enforcement

No change

No change

March 2012

New regulation

No change

No change

May 2015

Amended

No change

3 years in the same company; no limits for renewal; no limit for all occupations

June 2018

Amended

Equal pay for equal work

No change

Maximum Dispatch Period

the Liberal Democratic government introduced the Worker Dispatching Law (1985), which allowed the use of temporary agency workers and staffing agencies (see JILPT 2005: 3) (Table 4.1). Initially, with private temporary staffing agencies approved, dispatched workers were permitted in just 13 occupations. In 1986, 3 additional occupations were added, and in 1996 the list of occupations expanded to 26. Finally, in 1999 the list specified only the occupations where dispatched labor was not permitted. That list has been continuously amended according to the changing economic environment by increasing the number of permitted industries and extending the term of employment; the only exception was the period from 2009 to 2012, when the Democratic Party of Japan was the ruling party. Companies also sought to enhance flexibility in the production system by employing on-call and temporary dispatched workers or by outsourcing or subcontracting parts of their production processes to other firms (MHLW 2006: 9). As implemented, labor market flexibility mainly

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involved reducing the number of regular employees and hiring nonregular workers in their place. This process was further supported by broader changes to labor market regulation that came in the 1990s, initiated by business and supported by the state, when the government established the Special Committee on Deregulation (SCD) in 1995. Representatives of employer organizations joined the SCD, and all the SCD’s chairs were the chief executives of large corporations; the chair of Keidanren (Japanese Business Federation) was appointed the committee’s vice chair. With only a few exceptions, labor was not represented on the SCD, and from 1999 to 2004 there was no committee member who spoke for labor (Imai 2011: 46 – 47). In other words, this was “reform without labor” in a committee and process that was engaged in reshaping the labor market (Imai 2011: 43). The changes to workplaces and their regulation have coincided with a decrease in the proportion of those in the lifetime employment system and an increase in the use of nonregular employees. The absolute numbers of regular workers continued to increase before falling in the twenty-first century; changes in the absolute number of regular workers are due to demographic trends and economic stagnation in addition to shifts in employment practices in companies (Mantale and Matsui 2011). In essence, this expansion of nonregular employees fractured the post-1945 labor market system and the implicit contract between management and workers characterized by lifetime employment, company unionism, and seniority wages (Imai 2010; Sato and Imai 2011). Nonregular workers are outsiders who lack many of the benefits associated with the previous system. Those still in the lifetime employment system are the insiders, who continue to enjoy some of its advantages (Ono 2007). Even so, the quality of these regular jobs has become more diverse, as the relationship between employers and employees has been flexibilized to support businesses and, hopefully, to enhance growth (Watanabe 2018a). The outsiders include workers with a range of different contract and working conditions. The official categorization of nonregular employment in the Ministry of Health, Labor, and Welfare’s Employment Status Survey provides statistics for nonregular workers, disaggregated as parttime workers (which is a status in Japan and is not based on the number of hours worked), arbeit workers (limited-term employment with limited daily working hours), dispatched workers (employees of temporary

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45.0

40.0

38.2

35.0

25.9 25.0

20.0

18.6 16.4 14.7

15.0

10.0

8.1

7.3

9.0

7.6 5.0

3.3

3.9 3.5 0.7

4.5

2.5

2.6 1.4

85 19 86 19 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 20 15 20 16 20 17 20 18

0.0 19

Percentage of Workers

30.0

Nonregular

Part-time

Contract or entrusted +other

Arbeit

Dispatched

Contract or entrusted

Other

Trends in types of nonregular employees, Japan, 1985 –2018. Source: Statistics Bureau of Japan (2020).

FI G URE 4 .1.

agencies), contract workers (fixed-term workers hired to perform specific tasks), entrusted workers (older workers rehired by their former employers after they have retired), and others. Figure 4.1 shows the trends in the proportion of nonregular employees and of the various subtypes of nonregular workers in Japan between 1985 and 2018. The proportion of nonregular employment has more than doubled over this period and accounts for almost 40% of all workers in 2018. The spurts and slumps in the growth of nonregular workers tend to reflect policy and legal changes as well as economic changes associated with the Asian economic crisis and the Japanese economy’s stagnation. With the labor force expanding from 67.87 million in 1997 to 68.30 million in 2018, those employed as nonregular workers has increased from 11.52 million to 21.17 million over the same period, and those categorized as regular employees have declined from 38.12 million in February 1997 to 34.23 million in the first quarter of 2018 (Statistics Bureau of Japan 2020).

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Although it is often dispatched workers who get the most public attention and make the headlines, the largest growth of nonregular workers has been among part-time workers. The number of these workers almost tripled between 1985 and 2018, reaching 10.3 million. Part-time work has been feminized, as it is mainly women with school-age children who are working part-time (Broadbent 2003: ch. 2). In 2007 the Japan Institute of Labor Policy and Training (JILPT) reported that when employers were asked to list all the reasons for using part-time hires, the most common reason was to reduce labor costs. The second most common reason was to meet the needs of the workers; employers claimed that some workers preferred to work part-time (JILPT 2007). Another common response was that the use of part-time workers enhanced the company’s flexibility to cope with fluctuations in demand for workers (Yutaka 2011: 10). The next largest increase in numbers was for arbeit work, which also more than tripled between 1985 and 2018, reaching just under 4.5 million in 2018. The employment of contract and dispatched workers also increased as employers reacted to changes in labor laws (Statistics Bureau of Japan 2020). When asked about contract workers, 38.7% of employers wanted workers to handle specialized tasks, and 36.8% wanted to secure work-ready and skilled workers (JILPT 2010: 10). The use of nonregular workers shows significant differences across economic sectors. In primary and secondary industries, nonregular employment declined. In primary industries the proportion declined from 5.8% in 1994 to 4% in 2010; in secondary industries the decline was from 33.4% to 24.8% over the same period. It has been in the service sector where nonregular employment has increased, rising from 60.3% to 70.3% between 1994 and 2010 (JILPT 2014: 39). The transition to a postindustrial society has undermined the job security of employees in Japan, not least because institutions in the labor market, such as labor unions and state protection, are not well developed in the service sector. Gender and Age Differences

Nonregular employment in Japan is linked to gender and age. Women were seldom part of the patriarchal lifetime employment system, which assumed that men were the head of households and that women would leave the workforce when they got married (see Allison 2013: 22 – 28). However, as the service sector expanded and more women entered the labor force,

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70.0

Percentage of Workers

60.0 50.0 40.0 30.0 20.0 10.0

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

0.0

Male Nonregular

Female Nonregular

F I G U R E 4 . 2 . Gender and nonregular workers, Japan, 1985 –2018. Source: Statistics Bureau of Japan (2020).

there has been an intensive casualization of women workers, especially as part-time workers (Mari Osawa 1993). The result is that women are most likely to be in nonregular jobs and are thus among the most vulnerable of workers. Figure 4.2 shows the increase in nonregular work from 1985 to 2018 for men and women. Clearly, nonregular work arrangements have become more common for both genders, but it is women who are far more likely to be in nonregular work over the entire period. In addition, the gap between men and women in nonregular work grew until the 2000s, after which it has remained relatively stable. In 2018 almost 57% of women were in nonregular work, whereas the proportion for men was 22.4%. This feminization of nonregular work reflects not just the gendered work model associated with lifetime employment but the strong patriarchal values embedded in the work organization and family (Broadbent 2003). This gender dualism in employment shows that patriarchy in the family and in the workplace has been mutually reinforcing. Thus, although women’s labor force participation has been increasing, it has done so in gendered ways. The patriarchy expressed in these differences is reinforced by legal and tax structures that reflect the male breadwinner– female homemaker model. Tax codes create disincentives for women to work full-time by exempting them from paying tax if they work limited hours. If they are married and work restricted hours, they can also continue to be claimed as deductions on their husband’s tax return. The Abe government has been reluctant to revoke the tax deduction because of the large number of

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full-time women homemakers and part-time workers who see their family as benefiting from these tax measures. The government considered removing the tax benefit as electorally negative (Brasor and Tsubuku 2019b). There are age differences in nonstandard work, and these also have gender differences. Most strikingly, Figure 4.3. illustrates the gendered nature of nonregular employment. Women are more likely than men to be nonregular employees in every working age group. In 2017 men were more likely to be nonregular employees when entering the workforce at age 15 – 24 years and when they were age 65 and older. At the younger ages more than 45% of men in the workforce are in nonregular employment. At the other end of their working lives, more than 70% are in nonregular jobs. At the prime working ages of 25 – 54 years, the proportion of men in nonregular jobs declines and stays relatively low. For women, when entering the workforce, their percentage in nonregular work is more than 50%, only a few percentage points above that for men. Unlike men, however, the rate for women does not sharply decline. In addition, for older age groups the proportion in nonregular jobs increases, rising to more than 78% for women age 65 years and older.

90.0 78.1

80.0 67.6

Percentage of Workers

70.0 58.6

60.0 50.4 50.0 40.0

71.4

52.5 48.9

45.1

30.0

30.3

20.0 15.3

10.0

9.2

8.7

0.0 15–24

25–34

35–44

45–54

55–64

65+

Age Male

Female

Proportion of nonregular employment by gender and age, Japan, 2017. Source: Statistics Bureau of Japan (2017).

FIGURE 4.3.

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Self-Employment

In many countries, including South Korea and Indonesia, self-employment has been considered a way to make ends meet. In Japan, however, with its long history of family business, where the enterprise has usually been inherited over generations, self-employment has had a reasonably high social status (Sugimoto 2003: 91– 93). For several decades such small businesses have had state support, which protected them from competition from large retailers. With origins in the 1950s, until 1998, the Large-Scale Retail Store Law shielded small retailers and self-employed shopkeepers from the large department stores and from the incursions of foreign retailers. Small shopkeepers were also exempted from sales tax. Part of the reason for this was that small retailers and self-employed shopkeepers were considered important political constituencies of the Liberal Democratic Party (Kasza and Horie 2011: 150). Local governments have also supported the self-employed through programs for small businesses in their areas, now also backed by the City Center Revitalization Law of 1998. Yet for all of this support and status, self-employment in Japan has been experiencing a long and steady decline, from 27% of total employment in 1981 to 10% in 2019 (Kambayashi 2017: 74; OECD 2020c). The main reason for this decrease is the deterioration of the earnings of the self-employed relative to the earnings of employees (Genda and Kambayashi 2002). In addition, self-employed women have made the transition to other categories of nonstandard work (Kambayashi and Kato 2016). South Korea

Nonregular work has long been a feature of South Korean employment. In 1990 temporary workers and daily workers made up 45.8% of all workers (KLI 2020b). At the time, however, such employment was a hidden category of jobs in official statistics and on the public agenda because it was considered a transitional phenomenon during economic development. Thus it received little attention from politicians, policymakers, academics, or the public. It was the 1997– 1998 economic crisis and the resulting neoliberal economic reforms that made nonregular work more visible and a way for employers and the state to achieve greater labor market flexibility. One of the major reforms, pushed by the International Monetary Fund (IMF), was labor market deregulation, which was meant to promote employment flexibility. Amid the crisis, on January 15, 1998, President-elect Kim Dae-jung initiated the Tripartite Committee. Both the former state-supported

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Federation of Korean Trade Unions (FKTU) and the new, independent Korean Confederation of Trade Unions (KCTU) joined the Tripartite Committee. Just three weeks later the committee agreed to the so-called Social Pact to address the economic crisis, allowing the National Assembly to revise the Labor Law two weeks later. This revision permitted mass layoffs and promoted labor dispatching. In the depths of the economic crisis, labor federations were convinced to accept these changes. The result was almost 100,000 layoffs a month in 1998. The revised Labor Law and the resulting layoffs had immediate and long-term effects. An immediate consequence was an explosion of nonregular workers as economic activity picked up and companies replaced laid-off regular workers with nonregular workers. The public and unions noticed this change, and it led to considerable criticism and debate. The laws that resulted had long-term impacts on businesses and workers. The National Assembly introduced the Protection of Dispatched Workers Law (1998). As had happened in Japan, the law meant that the Tripartite Committee made decisions on which industries would use dispatched workers. The resulting list stipulated 26 areas of employment; it included whitecollar positions (e.g., computer engineer, telemarketer, and translator), but most were lower-level positions, such as cleaners, security guards, delivery workers, and parking attendants. In addition to dispatched workers, a variety of other forms of nonregular employment became more common, including fixed-term workers and contract workers. Before 2002 there was no official term for nonregular employment, reflecting the previously hidden nature of precarious work. Work was classified by the length of the employment contract, not by the type of employment. At the time, the Korean Statistical Office identified two types of nonregular workers: temporary workers and daily workers. Regular workers were defined as those employed in a position for more than one year. Temporary workers were those working longer than one month but less than one year. Daily workers included those employed for less than one month or on a daily basis. This classification generated problems when the working period was not the main concern for employers. In response, the Statistical Office developed a new system that focused more on employment contracts and introduced new classifications, including dispatched and limited-term contract workers. This change of definition and classification of nonregular employment categories was itself reflective of Korean labor politics. The official

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recognition and statistical reporting of nonregular employment was made possible by the Tripartite Committee’s adoption of a new definition of nonregular workers (beejungkyujik) in 2002, and implemented by Statistics Korea in 2003. Significant disputes over the definition arose, with the Ministry of Labor demanding that the definition of nonregular workers exclude those temporary workers who essentially have their contracts extended on a regular basis; labor unions included them in the category of nonregular workers (K.-Y. Shin 2012: 3 – 6). The compromise was the exclusion of “atypical workers,” such as freelancers and independent workers. The change of definition made nonregular workers more visible, but it also excluded many who might be considered nonregular. Under the new definition, in 2003 almost 64% of temporary workers and about 13% of daily workers were considered regular workers (Statistics Korea 2015; KLI 2020a). The discrepancy between old types of nonregular employment based on the length of employment and the new types of nonregular employment became a troublesome issue because it ignored the increasing number of nonregular workers, such as freelancers, delivery workers, and platform workers. Struck by the growth of nonregular work, civil society organizations (CSOs) and unions became increasingly critical of the government, demanding the further amendment of labor laws and the introduction of additional social protections for nonregular workers. As a result of lengthy negotiations over nonregular work, the Nonregular Employment Law was legislated in 2006 and implemented in companies with more than 300 employees in July 2007. In 2009 the law was extended to companies with five or more employees. These laws introduced protections against discrimination for fixed-term, part-time, and dispatched workers, limited overtime work for part-time workers, and specified limits on how long fixed-term and dispatched workers could be used before being considered permanently employed (B.-H. Lee and Eun 2009). Nonregular work in South Korea is directly associated with two dualisms that have been a feature of the country’s economic development. The first dualism is that between those inside the wage and contract employment system— the “insiders”— and the large number of the working population outside it. These “outsiders” are usually considered self-employed. Self-employment had been generally decreasing as industrialization has proceeded, mirroring patterns found in Western countries during earlier periods of industrialization. However, even today, the self-employed

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remain a relatively large segment of the workforce, with the number increasing following the 1997– 1998 economic crisis, making self-employment an important feature of nonregular and, more broadly, precarious work in South Korea. We discuss this in greater detail later. A second dualism is the common one between regular and nonregular workers, differentiating working conditions and life chances (B.-H. Lee and Frenkel 2004; K.-Y. Shin 2013). As already mentioned, when the government began to implement crisis-induced economic reforms, nonregular employment increased sharply (Crafts 1999). Labor market reform was accompanied by a package that included neoliberal policy reforms, such as the privatization of public corporations and deregulation of financial markets. Labor market changes have given rise to a persistence of self-employment and an extensive casualization of labor, especially among small and medium-size enterprises (SMEs), which were particularly hardhit by the crisis and sought to reduce wage costs. Figure 4.4 presents the trends of nonregular workers based on data collected using the new definition and subcategories of nonregular workers. These data capture a range of workers: temporary, daily fixed-term, dispatched, subcontracted, special independent, and home workers. Nonregular workers expanded rapidly from 3.84 million in 2002 to 5.39 million in 2004 and then grew to 7.48 million in 2019. The proportion of nonregular workers in the total workforce increased from more than 27% to 37% in 2004 and then dropped to about 33% before rising again to 36.4% in 2019. In these aggregated data fixed-term workers make up the largest part of nonregular workers, with more than 4.78 million, or just over 64% of nonregular workers and more than 23% of the total workforce. Next largest among nonregular workers are those in part-time positions, with just under 3.2 million, or 42.2% of nonregular workers and 15.5% of the workforce (KLI 2011, 2019).1 The proportion of nonregular workers reached a peak of 37% of the workforce in 2004 as employers continued to cut costs in the recovery period following the economic crisis. The rate declined for a time because of intense political pressure on companies to reduce the proportion of fixed-term contract workers and atypical workers. In 2006 a further consequence of the contestation around nonregular work was a revision of the dispatching law that reduced the incentive for businesses to use this form of labor. Fixed-term employment has expanded recently, to 4.8 million in 2019. Meanwhile, the proportion of part-time workers has continuously increased from just under 6% in 2002 to over 15% in 2019.

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40.0

35.0

Percentage of Workers

30.0

25.0

20.0

15.0

10.0

5.0

0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total

Fixed term

Part-time

Trends in nonregular employment, South Korea, 2002 –2019. Source: Korea Labor Institute (KLI 2011, 2019).

FIGURE 4.4.

Despite the decline in nonregular employment from 2002 to 2014, the wage gap between regular workers and nonregular workers grew larger, from almost 34% in 2002 to over 41% in 2018 (KLI 2019). Gender and Age Differences

Figure 4.5 shows the proportion of men and women in nonregular work as a percentage of men and women in employment for South Korea from 2002 to 2018. The most obvious point is that the percentage of women who are nonregular workers is significantly larger than the proportion of male nonregular workers throughout the period. In addition, the gap between women and men expanded over the period, increasing from about 9% in 2002 to more than 15% by 2018. These gender differences reflect the deeply patriarchal nature of South Korean society, which is rooted in both ideology and practices and underpins the male breadwinner– female homemaker model of the family. Although both Japan and South Korea exhibit strong gender gaps and patriarchal systems, these operate somewhat differently in the two countries. In Japan the gender gap is seen mainly in the difference between the

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50.0 44.0

43.7 43.6

45.0

42.6 42.0 40.7

39.6

41.7

42.9

41.4 40.6 41.1 41.2 41.5 39.9 40.2

Percentage of Workers

40.0 35.0

32.9

30.0 25.0

32.2 31.4 30.3 31.4 27.6

28.8 28.1

23.5

26.9 27.7 27.0 26.4 26.4 26.4 26.3 26.3 26.3

20.0 15.0 10.0 5.0 0.0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Male Nonregular

Female Nonregular

Nonregular employment by gender, South Korea, 2002 –2018. Source: Korea Labor Institute (KLI 2011, 2019).

FIGURE 4.5.

representation of men and women in regular as opposed to nonregular jobs. By contrast, the gender gap in South Korea occurs mainly in the differences in earnings between men and women. As will be discussed in Chapter 5, South Korea has the largest gender gap in median earnings of the countries in the OECD (34.1%), compared to a gap of 23.5% in Japan and an average wage gap of 12.8% among the OECD countries in 2018 (OECD 2020c). The South Korean pattern of gender differences across age cohorts is also different from that in Japan (Figure 4.6). Whereas men and women age 15 – 24 years have a similar rate of nonregular employment, and at a rate lower than in Japan, the proportion of women in this category increased substantially relative to men in all age groups. In the prime working years the gender gap in South Korea is less than that in Japan. Korean women’s rates converge with those in Japan only from about age 55. The rate for Korean men is considerably lower than the rate for men in Japan for those age 65 and older, whereas women in both countries have rates approaching 80%. Self-Employment

At first glance, self-employment in South Korea seems to mirror the orthodox understanding of self-employment as a moribund activity that

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90.0 78.73

80.0

Percentage of Workers

70.0

65.15

60.0 50.0 40.0 30.0

43.79 35.42

49.94 42.98

32.34

36.11 23.49 23.71

20.0 10.0

13.9

15.33

25–34

35–44

0.0 15–24

45–54

55–64

65+

Age Male

Female

Proportion of nonregular employment by gender and age, South Korea, 2016. Source: Adapted and calculated from Statistics Korea (2018).

FIGURE 4.6.

declines as capitalist industrialization proceeds. Yet, unlike Japan, where the self-employment rate has declined to about 10% of the workforce, selfemployment in South Korea has not diminished to the same extent. In South Korea the proportion of those categorized as self-employed declined steadily from more than 50% of total employment in the late 1970s to 37% in 1991 and 25% in 2019. This rate, though, is reasonably high, at roughly the same percentage as in Chile and Mexico, but higher than almost all OECD countries (Trading Economies 2020; Pulse 2019). The pattern of steady decline was interrupted by the 1997– 1998 crisis, which resulted in self-employment increasing to more than 38% in 1998 before declining again (Statistics Korea 2020b). Among those who are self-employed, 82% work as individuals or as unpaid family workers, with an average income that was about 70% of what regular workers earned in 2015. Seven out of 10 of those who are self-employed are in the service sector, and 40% are working in enterprises with fewer than 10 employees (KLI 2019). This means that as a contributory scheme, about one-quarter of the self-employed do not join the National Pension Scheme. Thus, although the economy displayed characteristics of an advanced industrial sector, such as world-leading information technology, automobile, and electronics industries, the domestic economy

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continued to rely on the self-employed, particularly in the service sector. A large proportion of the self-employed have few or no employees. This partly reflects the remnants of the preindustrial economy, which makes up a significant portion of the precarious workforce (Arita 2016: 181– 83). Indonesia

In categorizing workers, Indonesia’s official statistics do not use definitions of regular and nonregular employment akin to those used in Japan and South Korea. Statistics Indonesia categorizes workers in two ways. One makes a distinction between workers in the formal and informal sectors, and the other includes the classifications of own-account workers, the self-employed, employees, casual workers, and unpaid workers. Using this second categorization and the interpretation of those data provided by Tadjoeddin and Chowdhury (2019: 50), we can make an initial calculation of regular and nonregular workers by counting “employees” as regular workers and aggregating the remaining classifications as nonregular workers. This calculation, which reflects the impact of the 1997– 1998 economic crisis, shows regular employment declining from just under 35% of total employment in 1995 to 30% in the mid-2000s. Regular employment then rises to more than 42% by 2015, having accelerated during the first term of President Joko Widodo, who prioritized the creation of “better jobs,” and reaches almost 43% in 2019 (Manning and Pratomo 2018: 166). That rate increase for regular work has since flattened and is likely to have reversed with the COVID-19 downturn. The mirror image is in nonregular employment, which peaked at about 70% of total employment in 2005 and declined to just over 57% in 2019. Yet this calculation should be treated with considerable caution. When campaigning in 2014, President Widodo promised to create regular jobs— employees— defined by Statistics Indonesia as a person who works permanently for others and gains some money or cash or goods as a wage or salary. In official surveys a worker is tallied as permanent if she or he has the same employer during the past month. Other data show that at least 33% of “employees” do not have long-term contracts; the World Bank (2016: 77– 78) observed that most companies, seeking to reduce costs, did not issue formal contracts or use short-term contracts, and it estimated that more than 80% of workers did not have a contract. In other words, in terms comparable with Japan and South Korea, we can estimate that only 10 – 20% of the total workforce are regular workers.

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This estimate is supported by data on informality in business. A survey of firms in Indonesia showed that 96% of firms with fewer than 5 employees and more than 93% of firms with 5 – 19 employees were categorized as informal (Rothenberg et al. 2016). Most informal firms do not use contracts for their employees. Rothenberg et al. (2016: 101) suggested that such informal firms account for 99% of all firms and employ about 95% of the workforce, proportions that have not changed much since 2010 (Gultom 2014: 24). Interestingly, official data estimate that the proportion of workers who are unpaid, own-account or self-employed, or casual— that is, those who are not contracted employees— has increased from 66% in 1996 to 72% in 2006 before declining to just over 62% in 2018.2 Of course, although the proportion has declined, the number of workers in this category has expanded, from 55 million in 1996 to 79 million in 2018. Those classified as self-employed and own-account workers make up a significant proportion of the workforce. In 1996 this category was almost 47% of the total workforce, or more than 39 million workers, declining to about 35% in 2018 (more than 44 million). The boundary between informal workers and the self-employed is particularly fuzzy, with workers frequently changing their employment status and types of work between unpaid family labor and wage labor. Often this has a seasonal element, as workers cycle through changes in labor demands, sometimes moving between urban and rural areas. Because agriculture continues to employ almost 30% of workers, it is mainly in this sector where unpaid workers predominate. Unpaid workers are also found in family enterprises, mostly in the informal sector. Self-employed workers are also seen in the informal sector, especially in tiny enterprises with only one or two employees, usually in family-based and household-level operations. Data on casual employment became available only in the mid-2000s, and such work is most common in transportation, mining, and construction. These sectors also have a predominance of self-employed and ownaccount workers, often as contractors and subcontractors. Own-account workers are those who labor at their own risk either without being assisted by paid workers or with using unpaid, mostly family, workers. Some changes in these categories are worth noting. In 2005, for mining, casual employees are listed at 18.7%, rising to 20.1% in 2015. In manufacturing, where two-thirds of workers are considered employees in the official data, in 2015 the casual figure was just 5%. However, in construction, 81.6% were

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listed as employees in 2000, but this figure dropped precipitously to 38.6% in 2005, with fully 46.1% tallied as casual workers. By 2015 these figures were 40.6% listed as employees and 50.8% as casual workers. Transportation in 2000 was 58% own-account workers and 30% employees. In 2005 this changed to 59.6% and 25.7%, respectively, with a further 7.1% designated as casual employees. By 2015 the reporting was 42.5% own-account workers, 42.1% employees, and 10.5% casual employees. Although the data for online labor platforms are scarce, this kind of employment has expanded. Most gig workers are not employees but are considered contractors, even though the core business is built on the labor of these gig workers. In this context most gig workers lack access to employment protections and “operate under precarious labour conditions” (Fairwork 2020). Informal Sector

Precarious work is not a term that has come into regular use in Indonesia, even though work that is uncertain, unstable, and insecure is the norm in the country. Part of the reason for this is that Indonesia’s development after the 1997– 1998 economic crisis came about in an era of hyperglobalization. This means that there is no tradition of Fordist or standard employment relations, with national manufacturing never having developed to the levels seen in Japan and South Korea. In this context, state, labor, and academic attention has remained focused on the so-called informal sector. This sector is large, composed of nearly two-thirds of workers (Tjandraningsih 2013). Although it is true that many of those experiencing uncertain, unstable, and insecure work continue to be those employed in the agricultural sector, Indonesia also reveals important processes of informalization that are occurring in what was once known as the formal sector. The orthodox economic approach, drawing on Lewis (1954), assumes that the existence of an informal sector marks an incomplete transition from underdevelopment to a modern economy, with the underdevelopment marked by poverty. This approach assumes that modernization will see a transition to formal employment as surplus labor is absorbed and wages rise, reducing poverty (see Ranis 2004). Such assumptions gather some support from the experience of industrialization in Japan, South Korea, and other late developers, where industrialization led to a decline in informality and today precarious work is largely experienced as a recent development to deal with demands for flexibilization, international competition and restructuring, and outcomes of economic downturn. The

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experiences of Indonesia and other countries in South and Southeast Asia are different (see Hewison and Kalleberg 2013). In these countries workers are moving from the agricultural sector to the industrial and service sectors. However, these last two sectors have already been subject to processes of flexibilization and are characterized by the extensive use of precarious forms of employment. Industrialization in these countries is taking place in the context of international competition in global production chains and the enormous expansion of service sectors, both of which require flexible employment. This means that uncertain, unstable, and insecure employment practices are the standard practices implemented to reduce costs and maximize flexibility for employers competing globally and are generally not a transformation of previous patterns. The scale of informality in Indonesia is illustrated by manufacturing, usually considered an exemplar of the modern formal economy. In 2010 an official survey showed that 92% of jobs in the manufacturing sector had not been legally registered with state agencies (Gultom 2014: 25). By 2014 not much had changed. The OECD (2019a) estimated that just under 10% of the workforce is actually in formal employment. Although it is often observed that most informal workers are in agriculture, the OECD (2019a: 5), using official data, actually found that more than half of informal workers were in urban areas. Those at the prime working ages of 25 – 54 years were most likely to be informal workers, with men and women roughly equally prone to being in informal work. The exception was for those age 65 and older, where women were about twice as likely to be in informal employment. An important characteristic of informal workers is a low level of education, with fully 85% having just primary or secondary education. Unsurprisingly, informality is also associated with being poor; in the poorest quartile of the population, 91.6% work in the informal sector. About a quarter of informal workers earn less than $3.10 a day (2011 purchasing power parity), with the most likely workers to be earning this low rate classified as employees and own-account employees, whereas just under 10% of workers in the formal sector earn less than this. The ratio of formal to informal hourly wages was about 26%, indicating a wage penalty associated with informality for the same number of hours worked by formal workers. Remarkably, both groups worked more than 60 hours per week. About 43% of informal workers are covered by health insurance, with none making contributions to pension schemes in 2014.

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Gender and Age Differences

Indonesia’s employment patterns are gendered, and its society is patriarchal. As was shown in Table 2.1, the male workforce participation rate is higher in Indonesia than in Japan and South Korea. Women are about as likely as their peers in Japan and South Korea to be in the workforce. Yet in Indonesia women are far more likely to be employed without pay and to be categorized as unpaid workers and family workers. Although the percentage of woman in unpaid work has declined from almost 34% in 1995 to 28% in 2015, men have mostly moved out of this category of employment, falling from just 10% in 1995 to about 5% some 20 years later. This means that women provide the bulk of mainly family-based work on farms and in household-based businesses as well as being primarily responsible for social reproduction. At the same time, women are less likely than men to be self-employed, employers, or casual workers outside agriculture. Even though women continue to lag men in the employee category, the gap has closed somewhat, from an almost 10% gap in 1995 to about 4% in 2015 (see Table 4.2). As already noted, according to OECD data, women are more likely than men to be in informal work only when age 65 and older. Men TA B L E 4 . 2 .

Gender by Employment Status, Indonesia, 1995 –2015 (%) 1995

2005

2010

2015

Male

Female

Male

Female

Male

Female

Male

Female

26.37

22.50

19.78

15.67

19.87

17.74

16.75

17.44

22.70 Self-employed assisted by temporary worker or unpaid worker

13.49

27.34

13.05

24.80

13.43

19.01

10.48

2.05

0.68

4.06

1.22

3.74

1.13

4.53

1.88

38.92

29.49

28.73

23.83

30.27

25.96

40.35

35.90

Casual employee in agriculture





5.06

5.53

6.01

5.70

4.76

3.88

Casual employee not in agriculture





5.67

1.73

6.60

2.24

8.87

2.45

9.96

33.84

9.36

38.98

8.72

33.60

5.72

27.96

Own-account worker

Employer assisted by permanent worker Employee

Unpaid worker

Source: SAKERNAS (National Labor Force Survey) conducted by Badan Pusat Statistik (BPS; Statistics Indonesia): BPS (1995, 2005, 2010, 2015).

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were more likely to be casual workers outside agriculture over the 2005 – 2015 period and more likely to be an employer or self-employed assisted by temporary or unpaid workers; women were far more likely to be unpaid workers. The average age of Indonesians in the workforce has increased over the period under discussion, from about 36 years in 1995 to about 40 years in 2019. The young are overly represented in the unpaid worker category and those employed casually outside agriculture, a pattern that has not changed since 1995. The workers with the oldest average age are the selfemployed (about 48 years). The youngest average age is for employees. Likewise, and as might be expected, the biggest drop-off in employment by age is seen between the 50s and 60s. Relatedly, the number of those engaged in self-employment increases substantially as age increases, with the highest percentage being for those in their 70s. Again, this is a pattern that has not changed since 1995 and likely reflects the fact that, because of a lack of access to social welfare, people must continue to earn a living into old age. A change worth noting is in unpaid workers, where 65 – 70% of those in this category were likely to be in their teens and 20s. However, by 2015 this figure had declined to just under 54%, suggesting an aging of this category of worker. Job Stability Job stability is one of the core factors that make up what we often regard as a good job (Kalleberg 2011). Job stability guarantees security with predictable economic resources. Termination of work by involuntary discharge might bring turmoil to a worker’s career and result in a family being in a precarious and vulnerable situation. Because job instability— the possibility of discharge— has been a permanent feature of the market economy, labor unions have attempted to reduce job instability through collective regulation of the market, including employer-provided protections and state-institutionalized protective measures for workers through labor laws. When the whip of the market forced workers to comply with the rule of the market, job instability was an instrument used by capitalists to gain control of workers, with employers’ interests predominating. The degree of job stability or instability is an outcome of the interaction of economic and political dynamics. In East Asia, where the state has played a key role in governing the economy for economic growth, workers did not have the power to influence the labor market until they

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organized. In Japan and South Korea, where workers have been mainly organized at the enterprise level and the rate of unionization is relatively low, only the organized regular workers get some degree of job stability. Because workers are mostly organized at big firms in the manufacturing sector, unorganized workers at small and medium-size companies are less likely to be guaranteed job security. The dual labor market systems in Japan and South Korea are characterized by differences in job stability between regular and nonregular workers. Job stability is most commonly measured by employer tenure, or the length of time a person has worked for a particular employer. Stable, long-term jobs are assumed to be more secure than unstable, short-term jobs associated with smaller firms and nonregular work. Japan

Japan’s lifetime employment, at least for a select group of Japanese men, up until about age 55 and in larger companies, is rooted in firm-based employment systems in which highly developed internal labor markets bind workers to their employers for a relatively long period of time. This stability of employment facilitates the acquisition of firm-specific skills and engenders a strong commitment to the employer; it has long been considered a hallmark of the insiders in Japan’s dual labor market system (see Lincoln and Kalleberg 1990). The average job tenure of Japanese workers is 11.9 years, and the proportion of all employees with job tenure longer than 10 years is 44.6% (OECD 2020e). For the purposes of assessing whether job stability has changed over time, it is most useful to focus on the group of workers who are most highly committed and dependent on full-time, career-oriented work.3 Kalleberg (2018) presents results for the average employer tenure for men age 30 – 50 in Japan, Germany, Denmark, Spain, the United States, and the United Kingdom in 1992 and in 2014; this time frame includes periods of economic expansion (in the 1990s) and economic recession (in the late 2000s) and thereby provides insights into relatively long-term trends in job stability in these countries for these men. The average employer tenure in Japan for men age 30 – 50 declined from 16 years in 1992 to about 12 years in 2014, which was the most dramatic decrease in any of the six countries. This is likely due to the increasing flexibilization of regular work, which resulted in greater diversification in Japanese employment relations beyond what would be assumed by dualistic theories of

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Japanese work arrangements. This provides some evidence that regular jobs in Japan have not been immune to the liberalization of labor markets prompted by pressures for greater flexibility and cost cutting, resulting in a weakening of the lifetime employment system and a gradual decline of firm internal labor markets. South Korea

The job security of Korean workers is limited, even among regular workers. Average job tenure in South Korea is far lower than in Japan, at 5.8 years in 1999 and 6.2 years in 2015, and the average age of employees increased from almost 36 to 41 years over that period. The length of employees’ tenure in companies did not change much until the 1990s, and job tenure was equally short across companies of all sizes during the period of rapid economic growth under the military regime. Tenure increased as the chaebol began to pay higher wages than SMEs and as the labor movement developed after 1987. By 1995 the difference in job tenure between small companies (less than 30 employees) and large companies (more than 500 employees) was 3.7 years, increasing to 5.5 years in 2015. Nonregular workers were mostly concentrated in SMEs in the 2010s, with much shorter job tenure. Nonregular workers have minimal job security. In 2006 the state sought to enhance tenure for these workers, introducing the 2006 Nonregular Employment Law to limit the maximum period of employment for nonregular workers to two years with a particular employer. Beyond these two years of employment, employers were required to hire the nonregular workers as regular workers. However, the employer response has often been to avoid this requirement by discharging nonregular workers before the end of a two-year contract. Thus a law meant to protect nonregular workers failed to do so and may well have made working lives more precarious. The length of time that employees work for an employer is lower in South Korea than in Japan and many other OECD countries. The average Korean job tenure is almost half of that for Japanese workers and far lower than in Germany (11 years) and France (11.4 years). Only the job tenure of workers in big Korean companies with more than 500 employees is close to the average job tenure of European countries (JILPT 2014: 76). Although the rate of employees with less than one year of job tenure was roughly the same, about 7%, in South Korea and Japan in 2012, the

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proportion of employees with job tenure longer than 10 years was smaller in South Korea (JILPT 2016: 74). This situation suggests that South Korea has a more liberalized economy than Japan. Indonesia

Although rates vary between provinces, Indonesian workers tend to remain in their jobs for relatively long periods. In discussing job tenure for 2016, Manning (2018: 89 – 90) showed that more than 40% of men and about 35% of women had held their jobs for 10 years or more in 2015. These proportions had not changed much over the previous five years. It was only in 2016 that the official National Labor Force Survey added questions that allowed for a deeper analysis of the tenure for workers on permanent and fixed-term contracts (Manning 2018: 91). Before that, the available data on tenure were mostly for regular workers, where about 20 – 30% had job tenure of less than two years. In addition, young people, women, and those with lower levels of education had the shortest job tenure (Allen 2016: 18 – 20). Further, for data collected from 2012 to 2015, regular employees consistently reported shorter job tenure than other workers, including own-account workers and the self-employed. Although this may appear surprising, it is likely that own-account workers and the self-employed have few opportunities for mobility from their existing situations, suggesting relatively little mobility between the informal and the formal sectors. For regular workers tenure was highest for those working in manufacturing and construction and lowest for those employed in services (Manning 2018: 92). Mobility Between Nonregular and Regular Jobs Having a nonregular job would not be a significant problem for workers if that job was a stepping-stone to a secure regular job. However, if nonregular jobs are dead-end jobs that trap workers in them, then those workers are condemned to jobs that generally lack security, have low pay, and come with few protections. Thus it is important to consider the possibility of job mobility from nonregular to regular jobs and whether particular labor markets offer possibilities for workers to move into secure work. Japan

Despite Japan’s two decades of increasing labor market flexibilization, mobility from nonregular to regular jobs is low. Because neoliberal economic

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reform has made it easier for employers to hire nonregular workers, the likelihood that young workers would remain in regular jobs declined from 45.9% in 1988 to 34% in 2004. Over the same period the possibility of young workers moving from nonregular to regular jobs has also decreased, from 25.4% to 17.2%. Instead, the probability that workers would move from regular to nonregular jobs has expanded from 10.5% to 17.2%, and the chances that young workers would remain in nonregular jobs substantially increased from less than 19% to more than 39%. These data underscore the fact that relatively low mobility from nonregular to regular work has become the new normal in Japan’s labor market (Oh 2008). Table 4.3 updates the data for the period since 2004, reporting information on the mobility between nonregular and regular jobs for both Japan and South Korea and providing data for men and women. These data show the general contours of the changing patterns of mobility in regular and nonregular jobs over the period. As might be expected from our earlier discussion of work patterns for Japan, on average, almost threequarters of men held regular jobs in all three years, but less than a quarter of women were in the same situation. The mirror-image contrast shows almost half of Japanese women but less than 5% of men had nonregular jobs in all three years. For Japan the table also suggests that mobility from nonregular employment to regular employment is rare for women and even rarer for men. This underscores the importance, particularly for

TA B L E 4 . 3 .

Employment Status in 2005, 2010, and 2015 for Japan and South Korea

Employment Status

Japan

South Korea Male (%)

Female (%)

23.31

53.70

44.99

11.30

3.38

7.40

8.01

Regular

1.78

1.50

5.79

6.74

Nonregular

Nonregular

2.54

8.65

7.28

8.39

Nonregular

Regular

Regular

4.58

6.02

10.20

11.48

Nonregular

Regular

Nonregular

0.51

3.76

3.28

3.83

Nonregular

Nonregular

Regular

0.51

4.89

3.58

4.55

Nonregular

Nonregular

Nonregular

4.58

48.50

8.87

12.02

2005

2010

2015

Male (%)

Regular

Regular

Regular

74.30

Regular

Regular

Nonregular

Regular

Nonregular

Regular

Female (%)

Source: Keio Household Panel Survey (KHPS) and Korea Labor and Income Panel Survey (KLIPS).

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men, of obtaining a regular job upon completion of formal education. As shown, the rigidity of the dual labor market means that relatively few men or women start their working lives in regular jobs and experience downward mobility into nonregular jobs (Watanabe 2018a). South Korea

There is more mobility between regular and nonregular work in South Korea than in Japan. For South Korea Table 4.3 shows that almost 54% of men and about 45% of women had regular jobs in all three years, whereas about 9% of men and 12% of women had nonregular jobs in all three years. Moreover, 10% of men and about 11% of women in nonregular jobs in 2005 were able to move to regular jobs in 2010 and 2015, and small fractions of both men and women in nonregular jobs in 2005 and 2010 moved to a regular job in 2015. The gender difference in mobility between regular and nonregular work is less stark in South Korea than in Japan. The higher proportion of Japanese men in regular work illuminates that lifetime employment for men is less well established in South Korea. It also indicates that the labor market in South Korea is less rigid and dualistic, which provides workers with greater mobility opportunities from nonregular jobs to regular jobs. Even so, there is evidence of job insecurity in South Korea: The proportions of workers who started in regular jobs in 2005 but were in nonregular jobs in 2015 were 14.68% for men and 16.40% for women. Indonesia

The data from the Indonesian Statistical Office are different from those for Japan and South Korea, but they do report the rate of employed people who experienced job changes in the previous year for 2005, 2015, and 2018. Based on workers’ responses as to whether they changed jobs in the previous year, these data show that job changes were more likely for casual workers and employees, at about 7.5% and just over 6%, respectively, but that job changes were relatively rare. The high proportion of workers who stayed at their job suggests that a large proportion of the workforce is stuck in low-productivity sectors, mostly in the informal economy and in agriculture but also in low-end service sector jobs. It is the predominance of the informal sector that shapes the life courses of most Indonesians. The Indonesian labor market may not be less regulated than the labor markets in South Korea and Japan, but the laws on paper are seldom used

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in practice by employers or are avoided by resorting to informal arrangements. Indonesian workers in the private sector are less protected and more insecure than even precarious workers in the private sector in Japan and South Korea. The large number of working poor testifies that the benefits of economic growth for more than two decades in Indonesia are concentrated on the tiny elite in business, the upper echelons of the state bureaucracy, and the military. Summary and Conclusions In this chapter we have documented the incidence and trends in nonstandard or nonregular work arrangements in Japan, South Korea, and Indonesia. We have demonstrated that nonregular work arrangements in Japan and South Korea have increased. The relative increase in nonregular workers in Japan for males and young workers is a major change for those who previously had been more likely to be in regular jobs. The figures for Indonesia show the continuing dominance of informal work, meaning that for most Indonesians work remains insecure and precarious. We have also shown that women are more likely to be in nonstandard jobs across the three countries. Gender segregation of jobs and employment has persisted even after the introduction of postindustrial manufacturing of high-tech goods in Japan and South Korea. Part of the reason for this has to do with the embedded gender ideology in employment practices, which is shared by both employers and workers in each country. Gender disparity in Indonesia is most evident in women’s higher rates of unpaid family employment, especially in agriculture. The highly gendered nature of labor market inequality is a distinct aspect of development in Japan, South Korea, and Indonesia and supports our thesis that it is not just global capitalism but also domestic institutions and culture that play an important role in determining the trajectory of precarious work. We have argued that there is a dualism in the work arrangements in each country. Japan has the longest history of dualism; the divide between insiders and outsiders reflects long-standing patterns in which large companies provided lifetime employment to mostly male workers. South Korea has shown an intersection of different forms of dualism formed during rapid industrial changes and political transition. The division of workers by company size has developed as a result of the concentration of economic power among the major chaebol during the period of rapid economic growth. Another division emerged after the financial crisis in

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1997– 1998, as the new government carried out abrupt neoliberal reforms under pressure from the IMF. In particular, enhancement of labor market flexibility contributed to the large rise of nonregular workers between 1998 and 2004. Nonregular workers in SMEs have experienced disadvantages relative to regular workers in big companies. For Indonesia the principal dualism is that between the informal and formal sectors. After the fall of Suharto in 1998, new democratic governments have been keen to embed the country in global value chains and to create more jobs in the formal sector. Yet this has proven difficult, and most workers remain stuck in low-productivity jobs as own-account workers, family workers, employees without contracts, and casual workers. There is strong path dependency in the formation of nonregular work in Japan, South Korea, and Indonesia, as the interactions of economic interests and political power shaped the direction of economic reform and the regulation of the labor market through legislation and policy. The emergence and proliferation of precarious work have been economic outcomes of political actors’ policy choices under the conditions of economic recession in Japan or economic crises in South Korea and Indonesia. The persistent gendered precarity in Japan has been reinforced by the labor reforms in the post– Plaza Accord period, whereas the pervasive precarity in the informal sector in Indonesia has been augmented by the newly rising precarity in the formal sector. In South Korea precarity was concentrated in economically disadvantaged groups, such as female workers with low education in SMEs, as the chaebol began to assert greater control over the national economy. Whether or not the nonregular work arrangements discussed in this chapter create precarious work depends on the kinds of social and economic protections that are available to workers in the different kinds of work arrangements. Temporary work isn’t all that bad, for example, if key protections (such as unemployment insurance, health insurance, and other economic security sources) are available generally. In the next chapter we examine inequalities between regular and nonregular workers in economic outcomes and social protections.

CHAPTER 5

Precarious Work, Wages, and Social Protections

likely than regular workers to be imperiled not just by their lack of social and legal protections but by dangerous work conditions. This situation, which has been repeated across the globe and has been rendered visible by the COVID-19 pandemic, has revealed the scale of precarious work. Workers’ vulnerability has been amplified because they have little choice in deciding whether or not to continue to be exposed to potential unhealthy conditions because of their need to earn a living. For example, in Japan the COVID-19 pandemic exposed discrimination against nonregular workers: PRECARIOUS

WORKERS

ARE

MORE

[A pregnant woman’s] colleagues have been allowed to work from their homes during the novel coronavirus crisis because they are regular employees. But the woman is a temporary staff worker, and despite her pleas to the company, her staffing agency and even the government, she has been told to keep coming to work. “I am unhappy with the treatment, but I cannot express my view forcefully,” said the woman, whose contract is renewed every three months. “I am worried that if I do, the company will terminate my contract.” (Naito et al. 2020)

In South Korea part-time workers also experienced discrimination: Due to the COVID-19 outbreak, the first day of school and kindergarten has been postponed, but after-school classes in kindergartens and 106

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the Dolbom classes [after-school care] in elementary schools are open as usual. The operation and safety of these classrooms are solely in the hands of part-time workers, the Dolbom teachers. Despite the spread of an infectious disease, these workers are not receiving adequate protection in their poor working environments. Dolbom teachers are typical non-regular workers in schools. They oversee the care of children in classrooms after school. The regular teachers and staff at most schools have decided not to go to work due to the delay of the school year, but Dolbom teachers have to go to school. (B.-R. Lee et al. 2020)

In Indonesia, where ride-hailing apps such as Gojek and Grab provide work for several million, the COVID-19 crisis brought a decline in work and thus a decrease in income. Susanty and Makur (2020) explain that motorcycle taxi drivers may only be the tip of the iceberg for Indonesia’s 70.49 million informal workers, more than half of those employed in the country who are considered the most vulnerable in the economic downturn driven by the COVID-19 pandemic. They are unregistered, unregulated and unprotected by a proper social safety net.

The precariousness of workers classified by governments as nonstandard, nonregular, and informal is reflected in their relatively low compensation inside the labor market along with poor social protections outside the labor market, whether provided by employers, the government, or both. This double jeopardy is not temporary. Rather, as we will discuss, it is embedded in a range of social institutions in Asia, from limited access to social welfare, educational and training opportunities, health care, and more. Although the level of institutionalization of social protections varies across Japan, South Korea, and Indonesia, in each country productivist notions of welfare have aggravated the development of adequate social welfare programs for those who are excluded from regular or standard jobs. Waged work is necessary as a primary source of income for people in these three capitalist countries, usually the main means of livelihood. This means that the transition from school to work is an essential life-course event, affecting family formation and the well-being of households. As we have discussed, before the impact of neoliberal policy in the 1990s, the normative form of the employment contract in Japan and South Korea was the standard employment relationship or regular employment. This represented a secure job with an employer, with statutory benefits and

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entitlements and the expectation of being employed for an open-ended amount of time. An underlying assumption of mainstream theories of economic development, based largely on Western experience, is that industrialization involved an expansion of such regular jobs, promoting the economic security of households and communities. This development allowed workers to leave low-productivity agriculture and move into the industrial sector (see, e.g., Gollin 2014). However, the rise of precarious forms of employment has reshaped already segmented labor markets, generating new cleavages. Globally, although a tiny fraction of nonregular workers can earn a high income, many nonregular workers suffer from low wages and limited or no social protections. This situation is also seen in Japan, South Korea, and Indonesia. Indeed, in Indonesia such regular patterns of employment have been available to only a small number of workers in some parts of the formal sector. Indonesia’s situation challenges mainstream economic explanations, because the country has achieved high rates of economic growth and urbanization for decades and yet precarious work remains predominant. In addition, in Japan and South Korea precarious work has expanded, also challenging the orthodox models of economic development and neoliberal-influenced policy. In this chapter we discuss the relationship between precarious work arrangements and wages, social protections, and poverty and inequality. Wages In Japan, South Korea, and Indonesia nonregular workers receive lower wages than regular workers, on average, even after controlling for the effects of working hours, human capital, and other productivity-related factors. However, the disadvantages experienced by nonregular workers vary in terms of gender and age, according to various social, cultural, political, and economic factors, including the nature of the labor market in each country. As discussed in Chapter 4, employers have used various forms of precarious work to provide companies with greater flexibility and to reduce costs and maximize revenue. In part, reductions in the total cost of employment are achieved by discarding the benefits that accrued to employees. Employers also achieve significant cost reductions by using various kinds of nonregular employees, including casual and part-time workers. The cost advantage for employers depends, of course, on the wage differentials and

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other fringe benefits, such as housing benefits or bonuses, between regular and nonregular workers. Japan

Japan legislated a law on minimum wages in 1959 (Takenaka 2019). In 2019 the average minimum wage was 901 yen (about $8.19) per hour, having gradually risen from 668 yen in 2005, worth about $6.08 at the time. Despite claims by the Chamber of Commerce and Industry that this wage would bankrupt many small firms, after taxes and statutory deductions this wage was less than the government’s calculated living wage for a singleperson household (Brasor and Tsubuku 2019a). Data on the minimum wage show that, although it has increased from 28% of the mean wage of full-time workers in 2000 to 38% in 2019, this latter figure is low in OECD country comparisons (OECD 2020e). There are two types of minimum wage: the regional minimum and the special minimum wage. The regional minimum is set by each prefecture and has been applicable to all industries and jobs in each prefecture since 2007. Each summer the Central Minimum Wages Council, a Ministry of Health, Labor, and Welfare advisory panel, recommends a minimum wage for 47 prefectures divided into four ranks, based on income, cost of living, and other factors. The central committee’s recommendations are then taken up by prefectural wage councils, which decide the actual minimum wages in each prefecture (Abe 2011). This minimum wage excludes commuting allowances, additional payments (such as for holiday and night work and overtime), company bonuses, and tips. The special minimum wage is applicable to specific industries. The coverage of the special minimum wage has been narrowed as the regional minimum has expanded. The special minimum wage is set after the regional minimum wage has been determined. Thus the special minimum wage becomes an additional adjustment of the minimum wage across industries in each prefecture. The minimum wage is then factored into the ways in which employers determine wages. In the context of enterprise bargaining, wage determination involves three basic mechanisms. One is teiki-shokyu, automatic regular wage increases, provided by employing companies without negotiations. Japanese companies’ wage systems incorporate these periodic pay increases into the monthly wage. A second mechanism goes beyond the enterprise and involves shunto, or the spring wage offensive. This organized process determines annual pay increases, with workers and unions synchronizing

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annual collective bargaining, and involves labor-management negotiations to overcome the weak bargaining power of enterprise unions. The third mechanism is the bonus payment system. Kato (2016: 2) found that in the early 2000s, 97% of firms that employed 30 or more employees paid bonuses twice a year to regular employees. Bonuses can amount to a quarter or more of regular wages. The OECD (2017: 45) estimated that the wage gap between regular and nonregular employees in 2015 was 45% for men and 31% for women. Table 5.1 expands on this, comparing hourly wage rates for male and female regular workers and for male and female part-time workers over several years.1 The first point to observe is that women’s wages lagged men’s wages for the whole period, ranging from one-fourth to one-third lower. When attention is shifted to regular and part-time hourly pay rates, the gap is higher still. Part-time men earn only 50 – 57% of the pay for regular male workers and earn less than regular female workers. The gap between part-time women and part-time men is far smaller, yet men still have a premium of 4 – 6% over the time period. Part-time women receive an hourly wage that is between only 44% and 53% of that of regular male employees. These gaps have been decreasing as the government has sought to increase the wages of nonregular workers to promote consumption and escape the prolonged deflation, but the savings for employers who employ nonregular labor are obvious and substantial. The wages of regular and nonregular workers not only differ by gender but also by age. Women regular workers never earn more than male regular workers but remain ahead of both male and female nonregular workers. Figure 5.1 shows that the wage levels of male regular workers in 2017 increased substantially across age cohorts until they were in their mid-50s and declined thereafter. This is not unexpected, because Japanese companies have long rewarded tenure with the employer (Nishimura 2017: 21). The pattern is similar for women in regular jobs, though the increases are far smaller for women and the decline is thus less pronounced. Even so, regular male workers earn about 45% more than similar females in the peak earning ages. However, no matter what the age, both male and female regular workers always earn more than their nonregular peers, and the gap increases until age 50 – 59. These patterns reflect the gendered seniority wage system that favors men over women, old men over young men, and regular workers over nonregular workers. They also illustrate how seniority is applied to both men

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TA B L E 5 . 1. Hourly Wage Gap (as Percentage of Regular Male Workers’ Wage) Between Regular and Part-Time Workers by Gender, Japan

1999

2005

2010

2015

2018

100.0

100.0

100.0

100.0

100.0

Regular female workers

66.5

68.0

71.6

66.9

75.5

Part-time male workers

50.8

52.3

54.4

55.8

57.4

Part-time female workers

44.0

46.1

49.2

50.9

53.4

Regular male workers

Source: MHLW (Ministry of Health, Labor, and Welfare), Basic Survey on Wage Structure (various years). Note: Annual bonus is not included, so the gap might be larger than that shown in the table.

450 400

Wages (Thousand Yen/Month)

350 300 250 200 150 100 50 0