Spring wage talks going the way of the dinosaur?

The curtain has fallen on the “shunto” wage hike negotiations that unions have conducted every spring for almost half a century amid the nation’s deflationary downturn and fierce international competition.

In addition to refusing to negotiate increases in basic monthly pay, a succession of companies are taking steps to review automatic annual pay raises for their employees based on age and seniority. Such moves effectively amount to a cut in pay.

With the annual union ritual at a historic turning point, attention is set to focus on what will happen to union-management negotiations and the impact of wage reductions on people’s lives.

Hiroshi Okuda, chairman of the Japan Business Federation (Nippon Keidanren) and chairman of Toyota Motor Corp., declared at the end of last year that Toyota will give its workers automatic annual pay increases but not negotiate on the monthly pay scales. He said bonuses will reflect their work performance.

The union followed his statement with an announcement Jan. 7, more than a month before the start of the shunto, that it would not demand an increase in basic monthly pay. Toyota workers now face the prospect of getting no hike in basic monthly pay for the second year in a row.

The union’s acquiescence sounded the death knell for the spring wage-hike talks.

Analysts said the “Toyota shock” not only led to the collapse of the shunto but to the management practice of automatic annual pay raises that constituted the root of Japan’s seniority-based salary system.

Toyota is meanwhile riding high. Its group profit is projected to top 1.5 trillion yen for the business year ending March 31.

But the fact that even Toyota has scrapped its practice of offering employee raises has sparked a sense of crisis with many corporate managers amid the current severe earnings environment.

Toyota’s move has encouraged other firms to consider paring pay hikes. The idea of not extending any regular pay increase has been floated at Honda Motor Co. and Mitsubishi Motors Corp., while Hitachi Ltd. and Chubu Electric Power Co. are moving to abolish their automatic annual pay raises. Fujitsu Ltd. and NEC Corp. have made it known that they will reduce the scale of regular salary increases.

Analysts note that the spring wage push was based on the premise of inflation and thus is now out of sync with the current deflationary spiral.

Toyota union leader Masamoto Azuma acknowledged that his group suffered a defeat by default and said, “We should not get into arguments over who wins or loses that do not match the background of the times.”

The late Kaoru Ota, who was chairman of the old General Council of Trade Unions of Japan (Sohyo), initiated the spring wage push in 1955. It was a way for unions to put united pressure on management and gain pay increases. It also signified union attempts to achieve uniform working conditions in major enterprises within the same industry.

Kiyoshi Sasamori, head of the Japanese Trade Union Confederation (Rengo), the successor to Sohyo, said: “We will put primary importance on the maintenance of employment in the current spring offensive. We will also wrestle with correcting the wage disparity between regular employees and temporary employees, such as part-time workers.”

Some say, however, that it has become unrealistic for companies to keep in step with union demands now that it is survival of the fittest.

Will seniority-based wages, lifetime employment and company unions vanish with the shunto?

Makoto Maruyama, managing director of NEC, said: “It’s a good thing for unions and management of all industries to engage in serious talks in the spring. I’d like to see it become a forum for discussion of matters such as pensions and health insurance.”

According to analysts, the revival of the spring negotiations depends on the ability of unions to come up with realistic proposals on new wage and employment systems.