Time for base wage increases

This year’s season for annual wage negotiations has entered an important phase, as seven of the nation’s eight major automakers have fully accepted labor unions’ bonus requests, and all major electronic makers have agreed to maintain age-based automatic annual salary increases. For the first time since before the Lehman Brothers shock in the autumn of 2008, the wage situation for Japanese workers has brightened. But anticipating difficult economic conditions, the labor unions have refrained from calling for across-the-board base wage raises.

It’s conceivable that companies anticipating good business prospects might have agreed to increase base wages had the labor unions pushed for it. Both labor and management should realize that unless workers’ wage bases are raised, it will be difficult to lay a solid foundation to create a virtuous circle of economic activities.

Wage negotiations are continuing for major companies that mainly rely on domestic demand as well as for small and medium-size enterprises. If executives of these firms can foresee better business prospects, they should respond positively to labor unions’ requests. Increased wages will lead to increased consumption, thus helping to pull the Japanese economy out of two decades of deflation and putting it on a path of recovery.

According to the Japanese Trade Union Confederation (Rengo), Japan’s largest labor organization, the average annual wage for workers in Japan has been decreasing since it peaked in 1997. Statistics from the National Tax Agency shows that it fell by about ¥450,000 from 2001 to ¥4.09 million in 2011. This suggests that the decline in wage levels is responsible for the long period of deflation.

Although the Abe administration and the Bank of Japan are trying to raise the price index by 2 percent through monetary policy, they should realize that raising price levels without increasing wages will further weaken the economy. Government, business and labor leaders should make all the more efforts to increase workers’ disposable income. They should pay attention to a recent report that some 5,000 major companies have internal reserves amounting to ¥267 trillion. Some of this money should be used to increase workers’ salaries.

But wage increases at major companies alone will not be enough to achieve a full-fledged economic recovery. Until conditions are improved for the millions of people employed at smaller firms and for the irregular workers who account for more than one-third of Japan’s labor force, they will not be willing to loosen their purse strings and help fuel an economic recovery.

Labor leaders should strive to organize such workers into labor unions, especially in the service industry where the percentage of irregular workers is very high, and make efforts to help increase their salaries. They also should pay attention to the fact that some workers, including permanent ones, are forced to work extremely long hours, sometimes leading to illness or suicide. Only when decent wages are coupled with reasonable working conditions will Japan’s economy improve and social conditions stabilize.