Impact of Globalization on Social Mobility in Japan and Korea: Focusing on Middle Classes in Fluid Societies*

Abstract: We argue that the social mobility of the Japanese middle classes is becoming closer to that of their Korean counterparts thanks to their increasing exposure to globalization. Globalization upsets the balance between transaction costs and opportunity costs of Japanese economic institutions such as Japanese management practices and the long‐term relationship between the principal contractor and its subcontractors (the shitauke relationship). As a result, it makes social mobility of the new and old middle classes, which have been protected by such institutions, more fluid. Thus we make this argument based on the assumption that the Korean middle classes have already been exposed to globalization and thus are more mobile than their Japanese counterparts. Then we test its empirical validity by analyzing absolute and relative mobility of the middle classes in the two societies with national representative data sets assembled in Japan in 1975, 1985 and 1995 and in Korea in 1990. The results of the analysis show: (1) that the Korean middle classes are more fluid than their Japanese counterparts; and (2) that globalization has affected the social mobility of the old middle class much more than that of the new middle class in Japan. The second finding implies that Japanese management customs that have protected a certain portion of the new middle class are less affected by globalization than the institutions that have protected the old middle class. In other words, the practices have a stronger inertia of institution.