Give a little on wages

This year’s season for annual wage negotiations has started as Mr. Hiromasa Yonekura, head of the Japan Business Federation (Keidanren), Japan’s most influential business lobby, and Mr. Nobuaki Koga, head of the Japanese Trade Union Confederation (Rengo), Japan’s largest labor organization, met Tuesday.

Since the Abe administration announced a joint accord with the Bank of Japan, under which the central bank will set an inflation target of 2 percent and strive to achieve it, stock prices have gone up and the exchange value of the Japanese yen has tended to depreciate. But the government policy could end up seeing price rises without increases in workers’ wages.

Management should not forget that if it is too timid about raising wages, the Japanese economy overall might deteriorate.

Rengo says that the average annual wage of a Japanese worker has been decreasing since it hit a peak in 1997. Statistics from the National Tax Agency shows that it fell by about ¥450,000 from 2001 to ¥4.09 million in 2011.

It’s not that there is no tail wind for labor. Under the government’s tax plan, if a company’s total wage costs increase due to wage raises, the company can deduct 10 percent of the incremental portion from corporate tax payments.

Some 5,000 major companies had internal reserves amounting to ¥267 trillion in fiscal 2012. The government should consider ways to encourage use of the money to stimulate economic activities, which will then lead to wage increases.

Rengo calls for increasing the total amount of Japanese workers’ wages by 1 percent. But the Keidanren report that serves as basic guidance for individual company executives in wage negotiations criticizes Rengo’s call as ignoring the reality of the economy.

Apart from rejecting across-the-board wage base raises, it even hints at freezing age-based automatic annual salary increases.

At Tuesday’s meeting, Keidanren insisted that because the business environment is still bad, emphasis should be placed on securing and stabilizing employment.

Rengo, on the other hand, insisted that increasing wage levels is the “royal road” toward ending Japan’s long period of deflation. Mr. Koga emphasized that it is workers who have underpinned the business and social foundations amid a difficult environment, which includes effects of the 3/11 disasters, and that now is the time to change the direction of management to one of increasing investment in human resources with a view to the future.

It is clear that unless consumer spending, which accounts for about 60 percent of Japan’s gross domestic product, increases, real economic recovery will be impossible.

Management may insist that economic conditions surrounding enterprises are still so severe that there is little room to increase wages. Some company labor unions, especially at electronic makers suffering from bad business results, may shift their focus to securing employment rather than to raising wages.

To help ensure a better future for the economy, leaders of both labor and management should strive to agree on at least some improvement in workers’ wages from current levels.