The Spread and Effectiveness of Work Style Reforms

Combining an original questionnaire survey with financial data from Tokyo Shoko Research (TSR), this paper examines how Japan’s work style reforms, a country-wide movement to reform personnel management to improve work-life balance, have spread and affected overtime hours, turnover rates, and corporate performance over the past decade. Some work style reforms, including paid leave/overtime management and enhanced IT utilization, have rapidly penetrated not only large companies but also small and medium-sized companies since 2016, when the Japanese government launched the Work Style Reform campaign. To evaluate the effect of the measures while addressing the possible endogeneity problem, we employ fixed effects models and dynamic panel data models. We find that policies for business prioritization have had a positive effect on productivity and that paid leave/overtime management and flexible work schedules have reduced overtime. The effects are heterogeneous: flexible work schedules have reduced overtime hours and increased sales per employee in the service sector, where the ratio of female employees is high, but have had no effects in the non-service sector. Certification systems for firms working to improve work-life balance, such as Kurumin, have had no effects on company performance