Wages of an economic upturn

While attention tends to focus on wage talks at trendsetting major firms in the annual labor-management negotiations, equally important this year will be the extent that the economic upturn benefits employees at small and medium-size firms, and irregular workers — who account for a growing portion of the nation’s labor force.

Recent data suggest that Japan may finally be emerging from its state of deflation. But prices are rising faster than workers’ wages, and the consumption tax hike in April will add to the burden on households. Total wage incomes of employees remain near record-low levels as companies turn more to low-paid part-time workers.

In talks between the Japan Business Federation (Keidanren) and the Japan Trade Union Confederation (Rengo) that started last week, both sides agreed on the need for pay raises to help ensure the economic recovery over the past year becomes self-sustaining. For the first time in years, Keidanren is urging member companies to turn their improved earnings into higher pay for workers.

Some top firms have indicated that they are willing to offer pay-scale raises, something they had earlier been hesitant to do because it would inflate fixed manpower costs. The union at Toyota Motor Corp. is set to call for a hefty wage raise as the automaker expects record profits in the year ending in March.

Still, it remains uncertain whether there are going to be broad-based substantial wage increases. While Rengo is calling for across-the-board pay scale raises, Keidanren maintains that the management of each company should determine how much it can afford to offer to its employees in accordance with the company’s performance. The business lobby warns that smaller companies will be less able to accommodate pay raises.

While the benefits of wage increases may be limited to workers at leading firms, the burden of higher prices will affect all households. Akira Amari, minister in charge of economic revitalization, recently said that the positive cycle of the economy will materialize only when wage increases can absorb rising prices. That has yet to happen despite the growth under the Abe administration’s economic policies.

According to Health, Labor and Welfare Ministry data, the nation’s per capita wage income in 2013 remained close to the level of the previous year, which was the lowest since the government started recording such data in 1990. Due to price increases, workers’ real wages after adjustments to prices fell 0.5 percent from 2012. The first increase in consumer price index in five years reflects higher costs of daily necessities such as food, gasoline and electricity due to rises in import prices caused by the weakening yen.

The labor ministry figures also show that part-time workers accounted for a record 29.4 percent of the total labor force. An increase in the number of part-time workers offset the slight rises in pay for full-time workers, keeping total wage income flat. According to the internal affairs ministry, the number of irregular workers, including part-time and contract workers, reached 19.06 million, or a record 36.6 percent of the nation’s employed workers in 2012.

Pay raises for irregular workers, who are usually not represented by organized labor and enjoy little job security, will also be essential for the economy to enter a positive cycle where improved corporate earnings encourage higher wages, increasing consumer spending and business investments. Both labor and business leaders must do their utmost to improve the wages of irregular workers.