Deinstitutionalization of Social Closure: The Case of Japan
What is missing in the literature is a cognitive foundation of social closure. While a dominant group hoards opportunities based on the power and resources its members have, inequality among groups may not easily be sustained unless it is seen to be legitimate by all members of the organization. Legitimization requires a theoretical basis of inequality, which rationalizes an unequal distribution of resources within an organization, which we call a “logic of social closure.” We argue that a logic of social closure institutionalized within organizations plays a critical role in shaping the broad pattern of inequality across organizations. Once such a logic is institutionalized, the current inequality is taken for granted by members of organizations. Logics of social closure and the established patterns of inequality, however, may not remain permanent. They can be challenged when organizations experience hardship under the previously dominant logics or when there is competing logics that rationalize different distributional patterns. In such case, the logic of social closure can be deinstitutionalized and the current inequality is delegitimized.
In this paper, we explore how different logics of social closure shape gender inequality in employment outcomes, using the case of Japan. In Japan, a logic of internal labor markets (ILMs) has been the dominant logic of workforce management since the post-war period. Developed initially from employers’ need to decrease turnover rates during the war economy, the ILM logic provided a theory of organizational efficiency based on employees’ uninterrupted, long-term commitment. Specifically, long-term employees nurtured firm-specific skills and stay committed until retirement, improving employee productivity. While the ILM logic did not specify who should be long-term employees, in practice women were excluded from the ILMs, because they were likely to take breaks from employment for family reasons. Work organizations that internalized the ILM logic developed employment practices that gave only men access to opportunities for job training, higher wages, and job security. Women were incorporated into the secondary workforce for short-term employment in dead-end jobs or part-time jobs that could be easily cut. These practices led to almost perfect sex segregation in the Japanese workplace
The dominance of the ILM logic, however, has been challenged as the efficiency of ILMs was questioned since the late 1990s. The prolonged recession created a very critical atmosphere against the “Japanese way,” which was once highly praised. Social discourse among scholars, media, and the government regarding the employment system reforms raged and often was critical of the ILM logic for its inflexibility in workforce management. In response to these criticisms, counter-logics against the ILM logic were developed, among which a prominent one was a logic of flexibility often found in liberal market economies. The flexibility logic criticized lifetime employment and encouraged downsizing. Also, because sex segregation was not an essential component of the flexibility logic, formal structures of sex segregation were dropped. Exclusionary practices based on the ILM logic were further deinstitutionalized when the need for work-family balance became Japan’s important national agenda to boost its very low fertility.
We examine how these competing logics affected Japanese firm’s decision to drastically cut or freeze hiring of new male and female employees. We examine how the decision is shaped not only by the persistence of the ILM logic but also by its deinstitutionalization in the face of competing logics of flexibility and work-life balance. We use rich longitudinal data on hiring outcomes of 1,200 large Japanese companies. The data cover 22 years from 1987 to 2008, a turbulent period for Japanese economy, which includes the bubble economy in the late 1980s, the bursting of the bubble in 1992, and the subsequent recession often described as the lost decade. We collected the data on annual hiring of men and women from the Japanese Company Handbook for Job Searchers (Shūshoku Shikihō in Japanese), which provides comprehensive and detailed workplace information such as workforce composition, employee tenure, employment benefits, and hiring outcomes. In addition, our quantitative analyses are supplemented with data from in-depth interviews with HR managers in 20 large Japanese companies across industries, such as manufacturing, construction, food and beverages, finance, IT, professional services, and retail services.
Our findings suggest that the ILM logic protects men’s employment opportunities while cutting women’s opportunities; but its deinstitutionalization has an opposite effect, reducing men’s opportunities more than women’s. As shown in Figures 1 and 2, when large Japanese companies cut back the number of new employees, they generally reduce hiring of women more than men. In addition, our preliminary analysis using random-effects logit models show a significant, gender-disparate impact of ILM logic on Japanese firms’ decision on hiring cuts and freezes. First, we find that companies strongly attached to the ILM logic, measured by the length of employee tenure, are more likely to freeze hiring of women, while they are less likely to cut hiring of men. However, companies that have deviated from ILM logic by engaging in workforce downsizings in the previous years, are more likely to freeze hiring of men, while significantly less likely to cut hiring of women. These findings remain intact even after controlling for other important factors of hiring outcomes, such as labor costs, performance, and firm size.
This study contributes to developing a theory of relational inequality by highlighting the importance of cognitive mechanisms in maintaining or disrupting inter-group competition over valuable resources at the organizational level. We demonstrate that a logic of social closure can legitimizes a dominant group’s claim of resources and rationalizes exclusionary practices.