Japan workers pressed to accept pay cuts

["Ulhas Joglekar" <ulhasj@xxxxxxxxxxxxxxxxxxxx>]

3 February 2000
Japan workers pressed to accept pay cuts
TOKYO: Japan is gearing up for its annual "shunto" spring labour
negotiations with employers seeking the first wage cuts in decades in
exchange for promises of job security.
With the traditional lifetime employment system starting to crumble and the
economy still in the doldrums after a prolonged recession, the focus of this
year's wage talks is whether workers will be able to win bigger paychecks --
and keep their jobs.
Under a system introduced more than 40 years ago, management and labour
representatives hold collective shunto wage talks from mid-February until
March to seek unified wage hikes.
Japanese employers, under intense pressure to improve profitability and
competitiveness in a tough global marketplace, say they must move ahead with
drastic reforms and cut costs.
In a report released last month, the powerful Japan Federation of Employers'
Associations argued that wages paid by Japanese companies were the highest
in the world and hefty labour costs were impeding corporate growth.
"It's impossible to keep both employment and higher wages at the same time
under the current economic circumstances," said Hiroshi Okuda, head of the
federation.
"If employers were to set aside more costs for each employee, many of them
would have no option but to cut the number of workers, even against their
will," he said.
Many analysts believe that Japanese managers are so concerned about
corporate image that they will shy away from taking drastic measures to cut
a large number of jobs, thus possibly putting an end to the lifetime
employment system.
"Japanese companies will go through a gradual process of restructuring over
the next several years," said Kazutaka Kirishima, chief economist at the
Research Institute of Sumitomo Life Insurance. "They can't resort to drastic
means at once."
The Japanese Trade Union Confederation (Rengo), which represents eight
million workers from across most industries, is aiming for an average pay
raise of three percent for the year starting on April 1.
Last year, the average increase was a record low 2.21 percent, and
economists say it will probably go even lower to two percent this year.
Rengo says employers should improve their business strategies and streamline
costs without laying off employees.
Union leaders insist higher wage increases are vital to boosting the
flagging Japanese economy, by stimulating consumer spending and domestic
demand.
"To boost spending, we must win a pledge from the employers to increase
wages," said Rengo chief Etsuya Washio.
Nikkeiren's Okuda argued there was no direct link between wages and consumer
spending, a driving force in Japan's economy. Some economists disagree.
"If wages drop and job insecurity remains high, consumer spending will never
increase," Kirishima said. That could hamper Japan's tentative move towards
economic recovery after its worst recession since World War Two.
Kirishima said a small wage hike could in fact hurt growth by putting a new
damper on spending among people who for the first time in decades face the
threat of job losses. "It would have a significant psychological impact on
the economy," he said.
Japan's unemployment rate in December climbed 0.1 percentage point from
November to 4.6 percent, or 2.88 million workers. This halted a steady
improvement in employment conditions since the rate peaked at a record high
of 4.9 percent in June and July.
Rengo's Washio accused employers of trying to scrap the traditional practice
of paying workers according to a seniority-based formula rather than by
performance.
"There is a seniority-based wage system even among professional baseball
players," he said. "It is difficult to create clear standards to assess job
performance objectively."
In a rare and bold move to break with the tradition, electronics maker
Toshiba Corp said this week it would introduce a merit-based wage scale from
April.
This year's spring labour offensive is expected to reach a climax on March
15 and 24, when most major unions are expected to receive replies from
management on their wage demands.(Reuters)
For reprint rights: Times Syndication Service
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