Posted on November 3, 2008

A Cultural Divide?

Kevin Lim, Reuters, Nov. 3, 2008

From bankers to factory staff, workers in the West face the bleak prospect of losing their jobs as a global recession starts to bite. For colleagues in the East, the pain is more likely to come through a pay cut.

Human resource experts say cultural differences explain why Asian firms try harder to preserve jobs in difficult times, which will stem unemployment and may help keep Asian economies afloat at a time of slowing exports.

The more paternalistic East Asian attitude may also make it easier for firms to recover quickly from the economic downturn since they will not need to rehire or train new staff, leaving some experts predicting a Western shift to Eastern flexibility.

“In the Confucian mindset, the right thing to do is to share the burden. There’s that sense of collective responsibility whereas in the West, it’s more about individual survival,” said Michael Benoliel, associate professor of organizational behavior at Singapore Management University (SMU).

In Hong Kong, senior staff at CLSA, the Asian brokerage arm of Credit Agricole, have agreed to a voluntary pay cut of up to 25 per cent to stave off the threat of redundancy. CLSA made similar cuts in 2003 when business slowed due to SARS.

A Western CLSA employee, who declined to be identified, told Reuters he accepted the cut because he would have looked like “scum” in the eyes of his colleagues if he did not agree.


In contrast, Western counterparts often felt compelled to make dramatic statements to show investors they were serious about cost-cutting, Pang said.

U.S. firms from General Motors to Goldman Sachs plan to lay off workers by the thousands, but at the Asian units of Western multinationals, job cuts will probably be less severe.


Employment law in East Asia tended to favor employers, allowing them to be more creative, and there was also government and public support for measures that help save jobs.

Singapore, for instance, encourages firms and unions to develop “flexi-wage” packages that allow employers to adjust salaries according to economic conditions.


The policy has kept the city-state’s unemployment at a low 2.2 percent, versus 1.7 percent in last year’s fourth quarter.

Japan’s jobless rate was 4 percent in September, up from 3.8 percent in January, while Hong Kong’s was flat at 3.4 percent. But U.S. unemployment is expected to have jumped to 6.3 percent last month from below 5 percent in January.


Experts say that while there are noticeable differences in labor practices in East and West, the gap will narrow as more firms become more multinational and competition forces firms to adopt the best practices of rivals from abroad.

Aquent’s Pang noted many large Japanese firms no longer offer jobs-for-life, while Western multinationals now employ a large number of people in Asia.

“With the trend of major Japanese companies being run by non -Japanese CEOs, slowly but surely they are starting to adopt more of a Western management style and philosophy.”