It has been a long time since the word “shunto” — the spring labor offensive — stood for its traditional meaning. With the domestic economy caught in a deflationary spiral, the idea of winning across-the-board wage concessions from management on top of regular pay increases no longer holds water. So it comes as no surprise that employers are bracing for a reverse shunto in spring 2003: a round of negotiations aimed at reducing wages.
A report from Nippon Keidanren, or the Japan Business Federation, says negotiated “base-up” increases are out of the question, noting that Japanese companies face a pressing need to strengthen their ability to meet price competition in world markets. Moreover, the report calls for talks to focus on either freezing or readjusting regular increases in basic pay that are linked to seniority. “The corporate ability to pay has been seriously weakened,” it points out. “Many companies are under pressure to cut wages.”
The report, published earlier this month by the federation’s committee on management and labor policy, sets guidelines for big-business employers as they prepare for shunto 2003. Nippon Keidanren, the nation’s most powerful business lobby, was created in May of this year through a merger between Keidanren (the Federation of Economic Organizations) and Nikkeiren (the Federation of Employers Associations).
It is the first time that the federation has mentioned, if indirectly, the need for wage cuts. However, employers in local regions, who are hardest hit by the economic slump, would prefer a direct statement. The reality is that annual wages, including bonuses, have already dropped at many companies across the country. This is particularly true among workers in management positions. Businesses that can afford to raise wages are few and far between. “Emergency pay cuts” are taken for granted in a broad spectrum of the corporate sector.
In light of all this, the Keidanren guidepost may be regarded as little more than a formal confirmation of the continuing wage squeeze. But it is also true that falling wages pose considerable downside risks for the economy. Lower worker incomes will dampen consumer spending and possibly accelerate the deflationary spiral. It is therefore essential that wage cuts, even if unavoidable, be kept to a minimum.
Beyond that, the wage issue needs to be handled in ways that do not exacerbate a looming job crisis. If a worker has to choose between a pay cut and loss of a job, most likely he or she will opt for a pay cut. Nothing is more unsettling for workers than the prospect of unemployment. As the report rightly says, jobs and wages are intertwined and therefore should be “handled in an integrated manner.”
The question is whether management is really serious about protecting jobs in exchange for labor’s acceptance of pay cuts. The report calls for member companies to “make maximum efforts to maintain employment.” They should heed this appeal to the best of their ability. The coming shunto will test not so much labor’s ability to extract wage concessions from management as management’s determination to meet its social responsibility of safeguarding employment.
The job market continues to deteriorate. The jobless rate, already at a record high of 5.5 percent, is likely to climb in coming months. For one thing, more troubled businesses will be forced to restructure or file for bankruptcy as creditor banks step up their write-offs of bad debt. The latest Bank of Japan quarterly “tankan” survey finds that the number of workers employed at the end of September registered a record year-on-year drop — 4 percent for big business and 3.3 percent for small business.
The silver lining is that corporate earnings appear to be rising overall, thanks largely to layoffs. But profits generated by such negative measures are not sustainable. Continuing job cuts — at a time when the economy faces the possibility of slipping into a fourth recession in more than a decade — will only spread the sense of insecurity among the workers and cool off consumer spending, the biggest engine for economic growth. This vicious circle must be cut off before it triggers a new bout of economic stagnation.
Nippon Keidanren plans to launch a unique campaign, starting in January, to spread the message of “protect jobs” among local employers. It is a worthwhile drive that hopefully will take some of the sting out of the other message: “Cut wages.” The campaign, if it is to succeed, must set the stage for a shunto in which employers demonstrate their resolve to maintain employment. Labor may have to swallow certain wage cuts, but, first and foremost, management must make utmost efforts to keep workers on the payroll.
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