Lifetime Job Guarantees Make a Comeback in Germany: Could U.S. Firms Follow Suit?

With unemployment in the U.S. at a steep 9.8%, the notion of lifetime job security may be alluring enough to make some folks want to pull up stakes and head overseas. Germany is currently facing a resurgence in companies offering employment for life, and in Japan, companies are still offering job guarantees to roughly 20% of workers.

But don't dust off your passport just yet: Some U.S. companies are offering shades of that guaranteed lifetime employment philosophy. For example, early this year, business analytics software company SAS trumpeted its promise to avoid layoffs in 2010 -- similar to one it made to workers in 2009, despite the recession.

"Too many companies worldwide sacrificed employees and benefits to cut costs in 2009," SAS CEO Jim Goodnight said in a statement. "SAS took the opposite stance, and we have been rewarded in employee loyalty and overall success of the business. Maintaining this position throughout the downturn puts us in the best position to meet the expected market upturn."

SAS, which this year ranked No. 1 on Fortune magazine's "Best Companies to Work For" list, offers free heath care, programs to promote health to its workers, and subsidized child care and a free recreational and fitness center at its North Carolina headquarters.

"SAS is doing something close to lifetime employment," said Hiroshi Ono, an associate sociology professor at Texas A&M University. "[Japan's] lifetime employment system, in its inception, was designed to take care of the worker's whole family. In that sense, Japanese companies offered housing, health care, use of company facilities, held company retreats to get the family involved in the corporate culture. They paid men sufficiently, so their wives didn't have to work, and the man could devote his entire life to the company and extract loyalty from workers. It's institutional packaging."

At the Heart of the Deal: Trust Between Employees and Companies


Ono and other experts say it's unlikely that U.S. corporations would ever institute lifetime employment systems similar to those that exist in Japan and Germany.

"For this whole system to work, it has to assume there is tremendous trust and commitment between worker and employer. In the U.S., people have been screwed too many times where a worker puts in 100%, but the company lays people off with little notice," observed Ono, who authored last year a paper, Lifetime Employment in Japan: Concepts and Measurements.

He further noted that systems under which companies offer employees lifetime jobs and support in their personal lives in exchange for loyalty from the employee are package deals -- and they don't work when only parts of the package are adopted.

But that doesn't mean U.S. companies never contemplated making such a drastic move. During the 1980s, when Japan was an economic powerhouse to be reckoned with, the country's lifetime employment system was pointed to as a driver for its success, says John Beck, president of North Star Leadership Group and author of the book The Change of a Lifetime: Employment Patterns Among Japan's Managerial Elite, published in 1994.

Loyalty to Employees Pays Off Later


The advantages of constant training and education inherent in a lifetime employment system made a big difference in the mid-1980s for Motorola Japan. During a huge downturn in the semiconductor business, roughly a third of the workers were laid off at Motorola in the U.S., but not a single worker was cut at Motorola Japan, Beck said.

Motorola's workers and executives in Japan took pay cuts, but during the downturn workers continued to show up at the factory and were expected to use their down time to do community service work, receive training on installing new equipment and how to repair the equipment they were using.

"They learned how to fix the equipment, so when it broke down they didn't have to call the repair people and wait," Beck said. "That's why they have one of the most efficient production lines."

Although U.S. companies have given lifetime employment plans some consideration, other societal differences exist to make its execution unlikely, Beck said. Japan's large companies, which are the ones that tend to offer lifetime employment, have a system in place in which college grads -- even those from prestigious universities -- all start at the bottom, exposing them to all facets of the company during their tenure. Those who make it to the top executive positions are often offered seats on the company's board of directors. That helps perpetuate the culture of lifetime employment, because those executives may be more sympathetic to the lowest level worker, Beck said.

In a German corporation, half of the supervisory board of directors must represent the employees, while the other half represents management. As a result, boards tend to be more empathetic to the workers, look favorably on employment-for-life policies, Beck said. "Germany's lifetime employment has been around for awhile. In Germany, a sense of fairness is high and individuality is low."

Germany is experiencing a sharp rise in the number of companies offering lifetime employment guarantees to their workers, and the country's unemployment rate has dropped to 7.5%, its lowest level in nearly two decades, according to a Bloomberg report. Chemicals giant BASF SE last month offered 33,000 workers at its Ludwigshafen plant lifetime employment, while Siemens AG (SI) took it even further in September by giving it to all of its 128,000 employees, the report noted.

Although Germany is seeing lifetime job guarantees make a comeback, Japan is noticing a total net decline in the number of workers who have access to them. Workers who currently have lifetime employment guarantees in Japan face no fear of having them removed, says Ono, but college grads are finding it tougher to get added to the system. The net effect is a decline in guaranteed jobs as the older workers who had them retire and are not replaced in the lifetime employment system to the same degree.

"I don't think employers want to abolish the program," says Ono. "I think they just want to experiment with different hybrid models for more flexibility in a changing market."


Increase your money and finance knowledge from home

Basics Of The Stock Market

Stock Market 101 - everything you need to know but were afraid to ask!

View Course »

Basics of Diversification

Learn one of the fundamental concepts of building a portfolio.

View Course »

Add a Comment

*0 / 3000 Character Maximum

16 Comments

Filter by:
sqiar

SQIAR (http://www.sqiar.com) is a leading global consultancy which provides innovative business intelligence services to small and medium size (SMEs) businesses. Our agile approach provides organizations with breakthrough insights and powerful data visualizations to rapidly analyse multiple aspects of their business in perspectives that matter most.

November 20 2013 at 8:52 AM Report abuse rate up rate down Reply
fallguys400

Union worker make up about 7% of the total work force.And alot of people think they are the problem.How did you come about this misguided way of thinking.In the 50's and 60's when we were a manufacturing powerhouse life was good for most everyone.Now that 85 to 90% of the workforce is non union we are on a downward spiral for the middle class while corporate america reeps record profits. How did you people get to the point where exploiting somes geographical location to very low wages as good foe america.You are lost in the fog of greed and have been led astray by greedy corporations and small business.Actually you are kinda pathetic and a danger to this great country we call the USA.So in short when we highly unionized we led the world and now that we are not highly unionized we bring up the rear.Does anything else need to be said treat your employees with respect and pay a living wage and we take back our rightful place in the world.Divide and conquer by saying sorry about your luck you lazy lifetimer it doesn;t matter I have mine how said the people of this country have become.I pray for you are a lost soul if you believe that money is more important than human beings.

December 29 2010 at 11:37 AM Report abuse rate up rate down Reply
cobleremodels

That will not work here due to greed of corporation ceo's and wallstreet. Socialism will not work with capitalism. Lifetime work has it's pros to those who are defined in life by what they do. That is my take here.

December 19 2010 at 7:49 PM Report abuse rate up rate down Reply
Jay

The reason lifetime employment will never work in America is because of our culture. Here everything is bottom line and the dollar rules the day. However elsewhere it does not. And......I am going to touch on a "contriversial" subject here. The countries that have lifetime employment are also allowed to discriminate based on race, age and anything else that they want to. Here that will get you sued!!!
So will America ever have lifetime employment?......not unless you are lazy and work for the government!

December 19 2010 at 11:11 AM Report abuse rate up rate down Reply
yankeedoug1121

i already work with some that think there county jobs are for life and they get away with murder. one guy some days don't even take his tool pouch with him. just his work sheet that tells managment what he did that day . i'm sure you can figure that one out. this coworker works harder to get out of doing his required duties.this is what will happen to lifetime jobs!

December 18 2010 at 2:20 PM Report abuse +1 rate up rate down Reply
melissa

Lifetime employment?? Wow what a bunch of lazy non productive employees we would have then! America has dropped so far from being a top world producer because of sending our jobs overseas and allowing illegals to work here. (look at all of the food recalls of late, because of low paid poorly trained illegals working the packaging plants) If this idea was to take off it surely would mean the death of America...we need to be focusing on ways to make our country great once again, not to be signing its death warrant.

December 18 2010 at 10:09 AM Report abuse rate up rate down Reply
dcrosetti

Look. I am an older guy. Been unemployed before and it's not fun. I worked for a large Fortune 500 company and gave them my soul. What did they give me? A pink slip, after 20 years. Went to another company, let go after one year. The lesson I learned is that when you turn 50, to the bean counters, you are a liablility. Take advantage of every program the company offers to save money. Prepare yourself in your spare time to learn a trade. While at the Fortune 500 company, I spend one night a week at a Jr. College. I took classes in heating and air conditioning. On the side I now have a weekend business repairing people's home units. I can install or repair. Since I have no overhead to speak of, I can charge less than the competition. I work for a private company full time and moonlight with heating and air. I make almost as much with the sideline as I do with my job. If you are unemployed the first thing you need to do is go back to school and learn a trade. Nursing, physical therapy, auto body and fender, aircraft mechanic, auto mechanic, electrician, heating and air conditioning, barber, cook, etc etc. Just because you worked for IBM 20 years doesn't mean you will retire there. Life is a process. Don't be defined by your job, define yourself by the people you love and who love you.

December 18 2010 at 9:23 AM Report abuse +5 rate up rate down Reply
Fetch

I worked for IBM for 30 years and retired. I thought IBM was one of those companies that put employees first. We had family dinners and a great retirement package. That has all changed for the worst. My son was terminated by IBM, along with many, many, others in Austin, Texas because those jobs went overseas.
He has had problems finding a similar job for two years now. Thank goodness he has savings to tide him over. IBM isn't the company I worked for anymore.

December 18 2010 at 8:22 AM Report abuse +3 rate up rate down Reply
laugh

As long as technolgy stops today - MAYBE. Can you imagine some of today's factories operating with 100s of people standing around. Mechanical technology (robotics) has replacesd almost as many workers as congress has by rewarding companies to move overseas. I think this could only work at a few places like the chemical plants listed above. My company making widgets today may be out of business when the world capacity of widgets is sold. What do i do with my emplyees then?

December 18 2010 at 8:22 AM Report abuse rate up rate down Reply
lloydbonifide

A short answer to that question-NO,NEVER.You could be told that but suppose your corp is bought,you get old and slow,you make more than a new hire,or they can send your job overseas.People,it's nothing personal,but when you become more trouble than youre worth,the pink slip is coming,its the American way.DO NOT EVER THINK YOU ARE NOT REPLACEABLE,YOU ARE.Union,easy fix,send the job overseas,union problem fixed.

December 17 2010 at 5:38 PM Report abuse +1 rate up rate down Reply