The government has decided to sharply slash the intake of new civil servants and offer reemployment to those who retire. Veteran bureaucrat Horie Masahiro, now vice president of the National Graduate Institute for Policy Studies (GRIPS), argues that personnel management for the civil service must not be hard on the young and soft on senior mandarins.

Downscaling Recruitment While Reemploying Retirees

The government decided on April 3 to hire only 3,780 new national civil servants in fiscal 2013 (April 2013 to March 2014) at the Headquarters for Administrative Reform Implementation, a body presided over by Prime Minister Noda Yoshihiko. This is a 56% cut from the upper limit on recruitment in fiscal 2009, before the Democratic Party of Japan moved into power. With the goal of rolling recruitment back, the DPJ administration has imposed a tight cap on new hiring, setting it at 4,783 people in fiscal 2011 and 6,336 people in fiscal 2012. The fiscal 2013 cap is the most stringent yet. Shortly before that, in March, the headquarters decided on a set of guidelines for coordinating the employment of civil servants with their pensions. The government has decided to raise the age at which pension benefits begin from 60 to 65, moving it up one year in age every three years starting from fiscal 2013. As this will create a gap between the mandatory retirement age (now set at 60) and the start of benefits during which retirees receive no income, the headquarters decided that all who wished to remain employed on a full-time basis be rehired. It has promised to start work on reform measures for implementing these changes.

Reducing total personnel costs for public officials is one of the policy planks in the DPJ’s political manifesto. When the Headquarters for Administrative Reform Implementation made its April 3 decision, it stated that in order to win acceptance for the plan to reform the tax and social security systems, which will impose a heavier load on the public, the government must demonstrate that it is willing to share the pain by, for instance, trimming personnel expenditures. It presented the drastic recruitment reduction as part of this endeavor. But scaling down recruitment will not lead to a reduction in the total number of public employees of the same size, and it is not clear what the effect on personnel costs will be. Moreover, because the government is restricting employment for young workers on the one hand while promising to retain older staff members and even keep them employed after they reach 60 on the other, it has been accused of being tough on young people while taking tender care of its older personnel. Some critics further point out that it is contradictory for the administration to call on companies to step up their hiring of young people and at the same time make large cuts in its own hiring. Talk can also be heard about how the changes will cause distortions in the composition of civil servants by age, which will complicate personnel management.

With these developments and criticisms in mind, let us take a closer look at Japan’s civil service setup. I will comment on the system for managing the total number of national public employees, the policy of holding down recruitment, the efforts to cut personnel costs, and the employment of older officials.

The Upswing in Civil Servants Who Work Until Retirement Age

Japan controls the number of national public employees under what is called the Total Staff Number Law, which places an upper limit on full-time employment. Within this legal framework, it has been scaling down the total number of civil servants by streamlining operations, among other measures. And when new duties and additional work for existing tasks need to be handled, it seeks to hold any increase in staff size to the bare minimum. These are the main components of its setup for managing the civil service, and they have enabled it to implement systematic reductions in employment over the long term, causing the number of national public employees to follow a trend of decline (figure 1). From an international perspective, Japan’s civil service is exceeding small in scale. One way of measuring it is to look at the ratio of civil servants to the total labor force. Data compiled by the Organization for Economic Cooperation and Development show that Japan’s ratio for national and local public employees combined is one of the lowest among its members (figure 2).

Note: 2006 data for France, Japan, New Zealand, and Portugal; 2007 data for Finland, Israel, Mexico, Poland, and Sweden; data for Iceland not available.

Source: “Employment in general government as a percentage of the labour force (2000 and 2008),” Government at a Glance 2011, Organization for Economic Cooperation and Development.

Personnel management for Japan’s national civil service must be handled under the constraints of an upper limit on staff numbers and a pyramidal hierarchy with many posts at the bottom and few at the top. It must take into account the practice of mass hiring of school graduates at the start of each fiscal year as well as a system of promotion based on categories in the civil service exam, the year of recruitment, and the number of years of service (seniority).

Because the number of available posts dwindles during the ascent in the hierarchy, many ministries and agencies have encouraged senior bureaucrats to accept early retirement. This practice has become difficult to follow, however, because it was coupled with arrangement to secure positions outside of government for ex-bureaucrats, resulting in the controversial practice of amakudari (“descent from heaven”). Complaints about this parachuting of government officials into high-profile posts in private enterprise grew more strident over the years, forcing the bureaucracy to slacken off on its efforts to act as a go-between. Under the circumstances, it became normal for public officials to keep on working until they reached 60.

In 2008, meanwhile, a system of specialist staff positions was introduced in order to promote a double-track style of personnel management within the organizational structure. The system seeks to make good use of bureaucrats unable to advance to or remain in the limited number of senior line positions at the level of division director or higher. Older civil servants can now opt to move into the new set of specialist positions, which offer pay and privileges nearly equal to line management posts, such as division director. When civil servants reach retirement age, moreover, they can take advantage of a reemployment system introduced in 2001. The use of this system has been on the increase.

The Downswing in Morale with Few Young Civil Servants

After all these changes in policies and systems, which have reduced staff sizes, suppressed new hiring, created specialist staff members, and opened the door to reemployment when civil servants reach the age of 60, what is life like on the front lines of the civil service? The first point to note is the decline in young people in low-grade positions. At the level of the section, the smallest unit in government organs, there has been an increase in sections without even one ordinary staff member, which forces section chiefs to handle all the assorted tasks by themselves. Naturally, they are apt to be snowed under by routine work. It is reported that motivation is being sapped because of the lack of leeway in such organizational units. The next point is that even the best bureaucrats cannot move up in the hierarchy very quickly. Advancement to the level of division director is not possible until public officials are at or over the age of 40. This is another factor tending to undercut morale. Among other concerns that have been expressed, I might mention the slow pace of organizational renewal, a weakening in organizational vitality, an increasingly conservative atmosphere, and a decline in innovative capacity. In addition, the average age of civil servants has risen, and so has the average salary amount.

At the start, I mentioned that in March the administration decided to begin working on legislation for rehiring employees on a full-time basis when they reach 60. The guideline covering this change states, “In the case of personnel who upon retirement desire full-time reemployment (appointment to posts requiring full-time service), the concerned appointment officer shall employ them in posts demanding full-time work on the day after their retirement.” If such a system is introduced, we can expect the number of retirees who opt for full-time reemployment to increase. For this reason, the new system needs to be coupled with measures to prevent aggravation of the problems now complicating life on the front lines of the civil service.

Separating Welfare Policies from Personnel Management

When presenting the recent policies for public employees who are approaching or have passed retirement age, the authorities have stressed that one of the key goals is to fully utilize their experience and skills. In actuality, however, the recent policies are not focused primarily on basic objectives in personnel management, such as sustaining and improving the efficiency, vitality, and ability of administrative organizations and public services. Their main aim instead is to serve as employment or welfare measures protecting these older civil servants. They are creating jobs within the bureaucracy so that bureaucrats need not seek outside employment, and they are supporting livelihoods using tax revenue (for salary payments) instead of pension benefits.

In order to rectify personnel management for the civil service, a line must be drawn between policies for administrative management and policies for safeguarding employment and supporting welfare. The authorities can demonstrate that this is their intent by, for instance, setting up a separate management structure for personnel rehired after their retirement. Even when they are granted full-time positions, they should not be handled within the ordinary framework for regular personnel. Measures should be devised for a stable and systematic intake of the new school graduates and other young workers who will become tomorrow’s senior bureaucrats. By such means, it should be possible to prevent young workers from being deprived of job opportunities by the treatment accorded to older employees.

The compensation for civil servants also needs adjustment. Even when those who reach retirement age are rehired for full-time positions, their compensation should be held at or below what they would receive if they opted instead for pension benefits. The pay awarded to those in specialist staff positions is another frequent target of criticism. Every effort should be made to hold down salary levels, taking into account the specific content of the work handled and the reasons for the appointment to these posts. They should not be granted more than a socially acceptable level of compensation. The bureaucracy’s personnel management system must not be one that is perceived to be hard on young people and soft on older personnel and high-ranking mandarins.

Furthermore, reform on a more fundamental level is also required. The root cause of many of the problems in personnel management for civil servants lies in the practice of deciding salaries and promotions based mainly on the number of years of service. In this light, it can be argued that the most important need in personnel management is a total overhaul of this seniority-based system.

(Originally written in Japanese on May 14, 2012. Title background photo by Kuyama Shiromasa.)