Employees’ Entitlement to Monopolistic Rents

The Japanese Supreme Court rejected a plea from “contract employees” (term limited employees) for retirement benefits, which are provided to full time employees, alleging that the denial of the benefits would be against the Labor Contract Law which prohibits discrimination between the employees. The opinion of the Court is that employers are accorded certain ‘reasonable” flexibility in structuring employment in the company as provided for in the Japanese labor legislation.

The argument sounds flawless, except that the type of the business the employer is engaged in: subway platform shops selling newspapers, drinks and other minor items to passengers walking the platform. Clearly, these outlets are catering to captive consumers who use the subway, or an accredited monopoly. In this scenario, monopolistic rents would accrue to the sales businesses which take advantage of the captivity or lack of alternative supplies. Indeed, the employer has accepted retired subway workers in exchange for the long term concession. Then the employment issue here is more a question of how to allocate the monopolistic rents than that of efficiency, as refusal to pay retirement benefits to contract employees will not likely benefit captive consumers.