Permanent employment

Permanent employment is a type of employment contract in which the limits of service are not established, which means that the contract does not have a duration. Although there are different definitions depending on the country or culture in which one lives, the following words sum it up perfectly; "workers who work all year and have an expectation of continuing employment" .

Permanent employment belongs to a group of employment contract types. According to the Spanish SEPE (Servicio de Empleo Publico), there are three other types of employment contracts: temporary contract jobs, training and apprenticeship contract jobs and trainee contract jobs. It could be said that temporary contracts are at the other end of the spectrum from permanent contracts, which is why it is necessary to define them. As mentioned above, in contrast to permanent employment, temporary employment establishes an end date in an established relationship between the employer and the employee. "Temporary work may cover many types of employment including seasonal, contract, casual, fixed-term, etc.". Nowadays, this type of work is directly related to job insecurity.

Labour market flexibility

The globalisation of the world we live in has its advantages and disadvantages. As far as the world of work is concerned, the globalisation of the economy has brought great changes. Due to the damage that the crisis of the seventies left on the world of work, namely the high unemployment rate, governments took measures in order to turn the situation around. The measures taken were aimed at making the labour market more flexible, which meant less strict measures on contracts to encourage job creation. In the words of the OECD "the relaxation of the constraints to the use of temporary employment contracts, and the measures curbing firing costs and making easier the individual and/or collective dismissal of permanent workers, would help to accelerate the employment creation and to reduce the unemployment rates".

As far as the labour markets of European countries are concerned, temporariness is the prevailing characteristic. According to Eurostat's European Union Labour Force Survey, in 2018 temporary employees accounted for 14.2% of all employees in the European Union and 16.2% in the Eurozone. These rates of temporary employment compared to permanent employment are mainly due to two reasons; on the one hand, countries that live from sectors that only work in certain seasons of the year, a clear example is Spain with tourism. And on the other hand, as we have already mentioned, the existence of laws that encourage temporary work as opposed to permanent employment.

Lifetime employment in Japan

Although we have tried to define of permanent employment that includes as many countries as possible, there are countries that at certain times have not identified with such a reading of permanent employment. Among the most famous exceptions is the case of Japan. The concept has changed since its inception around 1910. Trade unions fought to improve workers' conditions and to hold companies accountable, so around the second half of the 20th century, it was redefined, taking the following form: Workers become employed right after they graduate from school with a particular company. The employer will not lay off his workers if possible even in the course of depression. The employee in turn will not quit his job at this company but tend to continue working there until he reaches his retirement age.

Japan's success and prosperity through this method around the 1960s was a mirror for the rest of the world in dealing with the oil crisis. Two of the characteristics of this type of work were seniority and competition among workers. Both seniority and merit were highly valued in terms of pay. On the one hand, seniority pay is based on lifetime employment. Each year the wage is increased if it is increased if the worker performs satisfactorily. Non-regular workers do not participate in this system. On the other hand, workers competed with each other to become more efficient and productive.

In comparison with the 1910 model, three major differences stand out :

• The stationary model: It is characterized by specialization of labour, on-the-job training, and a body of firm-specific customs. it is implicitly expected that a worker will quit voluntarily as a result of failure to compete successfully with fellow workers of the same generation and tenure.
• The growth model. For this model, the concept of stationary lifetime employment is modified. Is based on organisational growth and annually gives hope and opportunities to all workers to continue their work and to be promoted.
• The stagnation model. Due to the 1973-74 oil crisis, companies took different measures to reduce costs, including laying off temporary workers or cutting overtime. In return they hired part-time workers, thus organisational hierarchies lost power, and the stagnation model is illustrated.

Footnotes

Permanent employment — recommended articles

Natural rate of unemployment — Industry 4.0 — Barter agreement — David Ricardo — Placement fee — European common market — Conditions of employment — Royalty fee — Part-time work

References

• Allan, C., Brosnan, P. & Walsh, P. (1998). Non-standard working-time arrangements in Australia and New Zealand. International Journal of Manpower, 19(4).
• Arestis, P., Ferreiro, J., & Gómez, C. (2020). Quality of employment and employment protection. Effects of employment protection on temporary and permanent employment. Structural Change and Economic Dynamics, 53.
• Eurostat (2018).European Union Labour Force Survey, Luxembourg.
• Kazutoshi, K. (2012). Lifetime employment in Japan: three models of the concept. Foreign Labor Developments. Bureau of Labor Statistics.
• OECD (2012), OECD Employment Outlook 2012. OECD Publishing, Paris.
• Rodriguez Asien, E. (2015). El crecimiento económico japonés, su modelo de desarrollo y su revolucion tecnólogica. Observatorio Iberoamericano de la Economía y la Sociedad del Japón. Vol 7, nº 23.
• Servicio Público de Empleo Estatal (2022). Guia de contratos.
• Webber, D. J., Pacheco, G., & Page, D. (2015). Temporary versus permanent employment: Does health matter?. Australian Journal of Labour Economics, 18(2).

Author: Iñigo Arin