Prime Minister Shinzo Abe has proposed a review of the seniority-based wage system prevalent among Japanese companies, calling for higher pay to younger generations and a shift to paying wages according to labor productivity. A growing number of large companies are in fact altering their systems to cope with changing business and labor market conditions.
Still, a review of the seniority-based pay system needs to be done in the overall context of employment practices by Japanese firms. The review should not be used as an excuse for simply trimming pay for senior employees.
Abe made the proposal in recent meetings with representatives from the business and labor communities — the same venue where he urged companies a year ago to translate their profits into greater wage hikes for employees. This year, he is urging that pay raises be coupled with reform of the wage system that traditionally has raised the pay according to workers' ages and the length of their employment with the firm.