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ECONOMY

Editorial: Maintain momentum for pay raises to ensure robust growth of economy

  • January 25, 2020
  • , The Japan News , 7:25 p.m.
  • English Press

Continued wage hikes are indispensable for stimulating consumption to put the national economy on a robust growth track.

 

The Japan Business Federation, or Keidanren, has released a report compiled by its special committee on management and labor policies, which specifies a management policy for dealing with this spring’s wage negotiations with labor unions.

 

In regard to wage raises, the report clearly states that the basic policy is “to study pay hikes proactively in accordance with the situation of individual companies while taking into consideration social expectations.” It is laudable that the report encouraged businesses to take action to maintain momentum for wage hikes.

 

Big businesses have achieved a combined increase of more than 2% in the pay scale and regular wage hike, for six consecutive years. No doubt, this is a factor that has sustained consumption.

 

Corporate internal reserves have topped ¥460 trillion, standing at the highest level ever. Labor share, a ratio showing how much of profits and other corporate benefits are returned to employees, has slackened at 70% or so. Companies with brisk business achievements are called on to raise wages proactively.

 

Concerning basic pay, the Keidanren report presented methods of prioritizing distribution to young and middle-aged workers and according pay increases based more on results in addition to raising the across-the-board pay scale for all employees.

 

This indicates a strong sense of crisis felt by business circles about the outflow of excellent young human resources to foreign companies and other entities.

 

In labor-management negotiations that will get into full swing in the months to come, it is necessary to be mindful also of measures to improve the labor environment, including creating workplaces in which employees are able to take days off easily to have and care for children.

 

Improving the treatment of non-regular workers whose wage levels are lower than those of regular workers is a task to be tackled urgently. The principle of equal pay for equal work will be applied to large companies from April. Rewarding workers, even if they are non-regular, with salaries that match their abilities and workloads is called for on the part of the management side.

 

Notable in the report released this time is that it pointed out that “problems have also emerged” in Japanese-style employment practices represented by the mass recruitment of fresh university and high school graduates, long-time and lifelong employment, and a seniority-based wage scheme. The report’s awareness of problems is reasonable.

 

While the simultaneous recruitment of fresh graduates has made it possible for companies to conduct personnel management in an organized manner, the practice also produced the so-called employment ice age generation. It has also restrained mid-career recruitment.

 

If the pay scale system is changed to one in which pay raises are decided with less weight given to age and years of continuous employment, it will enhance capable young and middle-aged employees’ motivation to work.

 

Nonetheless, it will take time to change labor practices that have been entrenched over many years.

 

It would be a realistic option to expand year-round and mid-career recruitment while continuing to use the mass recruitment of fresh graduates and long-term employment as core employment practices. Businesses and labor unions are called on to deepen debate on desirable measures.

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