Abstract

The role of security in the employment systems of Japan and the U.S. is evaluated in this chapter. In particular, the benefits and costs associated with two types of security—employment security and income security—are first analyzed before it examines how a firm's optimal security structure is shaped by macroeconomic and institutional constraints. It considers the relationships among employment security, specific labor market institutions, and the publicly provided income-insurance systems in the U.S. and Japan. This chapter argues that lifetime employment requires mutual risk sharing on the part of employers and employees. Furthermore, the security systems offered by Japanese and U.S. employers are shown to be consistent with their respective institutional environments. Finally, how the Japanese security system performed during the recession of the early 1990s is also explored.