November 5, 2008 / 1:30 AM / 11 years ago

A cultural divide? While the West axes jobs, Asia cuts pay

SINGAPORE (Reuters) - 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


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.

Singapore’s Chartered Semiconductor also implemented temporary salary reductions of 5-20 percent after posting a loss, with senior management taking the biggest hit. And in Japan, chipmaker Elpida cut its chief executive’s pay by 50 percent.

Steven Pang, Asia regional director for Aquent, a headhunting firm, said in many East Asian companies there was an obligation “to take care of members of the family and go through the pain together” even if that meant incurring losses.

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.

Firms have to adapt labor practices according to the countries they operate in, which means they tend to be more restrained when sacking staff lest it hurt their ability to sell products and attract people, Benoliel said.


Mark Ellwood, who heads the Singapore, Malaysian and Thai operations of Robert Walters, an executive search firm, said labor laws in most Western nations favored employees and made it difficult for firms to reduce salaries without attracting lawsuits from disgruntled employees.

“In many cases, it’s easier to make the retrenchments.”

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.

According to the city-state’s Manpower Ministry, about 83 percent of people in the private sector were employed under some form of flexible wage system, and 38 percent had variable components built into their monthly wages as at end-2006.

The monthly variable component could run as high as 70 percent in the case of top executives, said Ho Geok Choo, president of the Singapore Human Resources Institute (SHRI).

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.”

However, SHRI’s Ho said the global crisis has raised questions about the Anglo-Saxon way of doing business, and she predicted a shift toward a more paternalistic work culture.

Western firms are trying harder to put on a more human face amid growing distrust among the youth in their home countries.

In the past, layoffs meant an empty box and an escort to the carpark, but firms now offer counseling and consultants to help staff find jobs elsewhere, said SMU’s Benoliel.

“They’ll still kill you, but they now do it gently.”

Additional reporting by Jennifer Tan; Editing by Neil Chatterjee & Ian Geoghegan

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