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| Corning and Japanese Jobs: Readers Respond |
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Wednesday, December 5th, 2001
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Eagle-eyed readers have suggested that our article on Corning last week was incomplete. We revisit the strange story of selective layoffs at a leading high-tech manufacturer. By Eamonn Fingleton.
Wacky columnist Dave Barry likes to boast about how alert his readers are � but their eagle eyes are as nothing compared to those of our readers at Unsustainable.org.
This point was impressed on me after I posted my column last week on Corning Inc., the high-tech glass maker. The column had suggested that Corning seemed excessively trigger-happy in firing its American workers, particularly as it was not equally gung-ho in dumping its workers in ultra-high-cost Japan. As we pointed out, the failure to chop in Japan, where wages run about 20 percent higher than American levels, probably reflected the strictures of Japanese industrial policy. We commented: �Japanese bureaucrats have traditionally been concerned to maximize the productivity of Japanese labor and a key strategy therefore has long been to force American high-tech corporations to transfer their most advanced production technologies to Japan. Basically American high-tech corporations hoping to sell in Japan these days are welcome only if they do much key manufacturing there (or, failing that, if they source key components or materials from there).�
All this inspired Steve Diamond, a law professor at Santa Clara University, to look for more information on Corning�s employment policies. In his search of SEC filings he found that the company has been increasing the proportion of its production of LCD glass in Korea while decreasing the proportion in Japan. Korea is, of course a low-wage nation, so this move would appear to undermine the point of my article. But actually it doesn�t.
Remember that the basic point is that Corning has not announced any layoffs in Japan. Japanese workers are being kept on, whereas less costly workers in the United States are being dumped. Although Corning plays its cards close to the vest, the absence of Japanese layoffs clearly indicates that, even in this painful global high-tech slump, the company has arranged its worldwide operations so that its Japanese workers are not short of work. Thus although the company could have minimized layoffs of American workers by bringing back production from Japan to the United States, it has clearly made a policy decision not to do so. No doubt in the short run, there would be some costs associated with such a move (particularly where American workers were being asked to switch to certain kinds of manufacturing with which they were not hitherto familiar). But in the long run the savings in wages and other costs would seem to justify such a strategy � provided only that there would be no blowback in terms of Corning�s ability to continue to sell in Japan (where many of its most important customers are located). That is a big if, of course. My inference, therefore, stands: Corning clearly fears that if it were to make big layoffs in Japan, it would be subject to retaliation by the Japanese economic system in the form of reduced Japanese orders for its products.
Japanese labor law � an extra cost for Corning
Unsustainable.org reader Brian Brookshire makes a related point. He wonders why my article last week omitted to mention the legal difficulties that would face Corning if it laid off employees in Japan. At Unsustainable.org we try to keep articles as short and simple as possible but perhaps in this case we erred too much on the side of succinctness. Brookshire is right, of course, that Japanese employment law would make it tough for Corning to make layoffs in Japan. But that does not mean that it would be impossible � particularly if the company pleaded that its Japanese production operations were hopelessly uneconomic and should be shut down in their entirety. The penalty for such a strategy under Japanese employment law would be significant but would not in itself appear to be so large as to offset the advantages of switching Japanese production to its becalmed U.S. factories.
In any case, Brookshire�s point about Japanese employment law begs the basic question � and that is why Corning has chosen to produce in high-wage Japan in the first place. After all, Corning has known all along that one of the problems of producing in Japan is that companies are strongly discouraged from using Japanese workers as a swing factor in adjusting to fluctuating world demand. Essentially the inflexibility of Japanese employment law makes Japanese workers seem even more expensive from the point of view of an American employer than a simple comparison of wages between the United States and Japan might suggest.
At the end of the day, we come back to the basic point, the trade point that inspired the article in the first place: if you want to sell high-tech products in Japan, you have to reckon with Japanese protectionism. Provided you produce in Japan and move the crown jewels of your production technology there, you will probably be welcome in the Japanese market. But if your products do not contain a significant proportion of Japanese high-tech added value, the Japanese system will put obstacles in the way of your selling in Japan. Faced with this logic most American corporations do what Corning has done: they cave.
Eamonn Fingleton is the author most recently of In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity (Houghton Mifflin, 1999).
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Contact Eamonn Fingleton |
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