Japanese stocks and profits are soaring under Prime Minister Shinzo Abe’s push to revive the economy. Even shop prices are up, a key step after years of deflation kept pocketbooks shut tight.
None of that matters to Shuzo Matsui.
The 28-year-old, who inspects paint jobs on Toyota Motor Corp. cars, makes about ¥4 million a year and his pay won’t go up even as he faces inflation and higher taxes. He’s one example of how Japan’s workers risk being left behind as Abe’s policies benefit companies and investors.
For his economic strategy to work, the prime minister says earnings at companies like Toyota, where profit is projected to double to a record ¥1.86 trillion this year, must lead to higher pay. Employees like Matsui have yet to see the benefits — in the 11 months through November, pay for the average Japanese worker rose just 0.2 percent; it’s fallen 15 percent in the past decade and a half. Japan’s unions will begin contract negotiations next month in labor’s biggest bid so far to share in the benefits of “Abenomics.”
“This is a litmus test for whether Abenomics works or falls apart,” said Martin Schulz, an economist at Fujitsu Research Institute in Tokyo. “How can you get growth to go up without getting money into people’s pockets?”
Abe is publicly lobbying corporations to share the wealth, arguing higher consumer spending is necessary to sustain economic recovery. He has the credibility of someone who pushed down the value of the yen, fueling record profits at companies from Toyota to Hitachi Ltd., Japan’s biggest employer after the automaker, to Nomura Holdings Inc., the nation’s top brokerage.
“Only when the long-missing link between corporate profitability and wages is restored will investment in houses, cars and other durables, and household consumption in general, finally rid Japan of its deflation,” Abe wrote in a Jan. 6 commentary for Project Syndicate, a Web-based opinion forum.
The stakes are especially high. The sales tax is set to jump to 8 percent in April from 5 percent now, raising the cost of food, clothes and other staples. The last time the levy was increased, in 1997, Japan fell into recession and the government was voted out.
The spring talks between unions and management are known as “shunto.” They only cover union members, but often set the tone for how other workers are treated.
The unions, which are organized by company and tend to be more conciliatory than similar groups in the U.S., have seen the surging corporate profits and sound more aggressive than in the past. They say it’s time to spread the wealth.
“If it’s just prices that increase without wages, there will be a tremendous social cost,” said Nobuaki Koga, president of the Japanese Trade Union Confederation (Rengo), the main umbrella labor group. “Abe and his administration understand the risk from the side effects of his policies.”
For its part, Toyota is telling workers not to expect too much. A November handout to employees cautioned: “Don’t be swayed by short-term results.” Currency-related gains made up all but 15 percent of operating-profit growth this business year, it said. Toyota doesn’t comment on the contents of internal documents, Brian Lyons, a spokesman, said by email.
“We are aware of the role Toyota Motor Corp. and the manufacturing industry as a whole are expected to play in revitalizing the economy,” he said. “Based on these expectations, the workforce and management will discuss this issue based on a request from the labor union.”
The union on Thursday said it was seeking ¥4,000 more in base pay a month, the first request for a raise in five years. It will also ask for a bonus of 6.8 months of salary, or ¥2.44 million. Last year, workers got 5.8 months; in 2008, it was 7.1 months, according to data provided by the union.
Although Toyota pays its 60,000 or so unionized Japanese workers about 60 percent more than the national average, even there, base salaries have risen by only about $30 a month in the past 15 years. The last time the company posted record profit, in 2008, workers got a bump of about $10. Bonuses, which make up about 30 percent of pay, have bounced around; last year, they remained a few hundred dollars short of 1997’s.
Toyota agreed last year to a union proposal for a 2013 average bonus of about ¥2.05 million, the biggest in five years. It paid a ¥2.51 million bonus in 2008, according to the Japan Automobile Workers’ Union.
One factor helping Toyota keep pay hikes modest is that it, like many Japanese companies, has two tiers of employees. It can hire temps like Matsui or permanent workers who get more benefits and employment guarantees. Permanent workers know that if they press hard for raises, Toyota can hire more people like Matsui — or shunt jobs overseas.
Nonregular workers like him account for all the jobs created under Abe. Japan now has a record number of people in such positions, about 20 million, or 37 percent of the workforce.
Matsui works on a paint line about a 30-minute drive from Toyota headquarters in Toyota, Aichi Prefecture. He works in the same factory as full-timers who make about 50 percent more than him. He also doesn’t receive the twice-yearly bonuses that full-timers get.
“I knew that was the deal when I entered, so I don’t get upset,” Matsui said over beers at a cafe around the corner from the studio apartment where he lives alone.
He spends his free time drinking and playing darts with buddies from the factory. After 10 years of work, he has less than $1,000 in savings.
Matsui says he doesn’t spend much time thinking about a brighter future, but when he does he imagines it’ll be pretty much like life is now — only without the worry of being laid off.
Like all Toyota’s temps, Matsui works a six-month contract that can be rolled over until 2 years and 11 months, according to its employee handbook.
Matsui knows that Toyota’s permanent workers are only modestly better off these days. One of his friends has been at Toyota for a decade. The worker, who asked not to be identified by name for fear of harassment by management, said he earns less than when he started because of lost bonuses and overtime.
If Toyota doesn’t share more of its profits with workers, the smaller companies, including those that supply the carmaker, simply don’t have extra profits to share. For companies that don’t do much business abroad, the very thing that’s enriching Toyota — the weaker yen — is driving up prices for fuel and other imported materials.
Fifty-four percent of smaller manufacturers in Toyota’s hometown said profits were lower, according to a city government survey published in September. Only 12 percent said they were making more money.
“Profits aren’t trickling down,” Norihiko Sugimoto, a staffer in the city’s Industrial Affairs Department, said by telephone. “The suppliers tell us they’re getting pressed to cut prices.”
Unions recognize that they can’t expect pay raises across the board.
“Look, not everyone is doing well,” said Rengo’s Koga. “It doesn’t make sense for workers to drive a hard bargain at a company that’s losing money or on the edge of bankruptcy.”
There’s skepticism that workers overall will be able to extract enough in pay hikes to keep up with inflation. Labor cash earnings, the benchmark for wages, are forecast to rise 0.6 percent in the year starting April 1, while consumer prices will climb five times faster, according to Bloomberg surveys of economists.
On Friday, the government reported that consumer prices, including fresh food, rose 1.6 percent in December, the fastest since 2008.
Matsui isn’t optimistic. When he started at Toyota two years ago, he thought he’d eventually switch into a full-time job. Last year, though, the factory stopped hiring. Now he thinks his days are numbered.
“The company’s going to say ‘sayonara’ to me when I get to 2 years, 11 months,” he said. “The pay is fine but my future isn’t secure.”