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This year’s “spring labor offensive” seems likely to stage somewhat of a revival after a long moribund period in which labor-management negotiations for wage raises have been perfunctory. Reversing its long-standing policy of restraining wage raises, Nippon Keidanren (Japan Business Federation), the nation’s most powerful business lobby, has assumed a rather positive stance concerning such raises in a report by its management and labor policy committee for 2006.

In the 1950s, Japan’s labor organizations started their annual spring labor offensive for industry-by-industry across-the-board wage raises. These annual wage negotiations raised the overall wage level of Japanese workers, thus helping to pass on the fruit of economic growth.

But the situation changed with the burst of the economic bubble in the early 1990s. In 1994, Nikkeiren (Japan Federation of Employers’ Associations), which later merged with Keidanren (Japan Federation of Economic Organizations) in May 2002 to form Nippon Keidanren, announced a basic policy of forgoing wage raises. Many enterprises reduced their work force and many labor unions accepted wage freezes (although traditional age-based annual pay raises remained) or gave up demanding wage raises. Thus the spring labor offensive was frozen.

The Nippon Keidanren report says that Japan’s economic upturn, which started in January 2002, is not only backed by exports to the United States and Asian countries but also by increased consumption and equipment investment at home. “The current economic recovery is the result of desperate efforts made at enterprises through joint cooperation between management and labor,” it points out.

Referring to wage raises, it says, “As to revisions of working conditions, it is hoped that employers will make appropriate decisions that can increase workers’ willingness to work without damaging the competitiveness of enterprises.” Behind this rather positive stance is the fact that many companies listed on the Tokyo Stock Exchange are expected to achieve record profits for the third consecutive business year.

Mr. Masaharu Shibata, vice chairman of Nippon Keidanren, who was the main force in writing the report, also said the fruits of economic success should be shared not only with high-performance employees but also with ordinary employees who work “silently but steadily.” He was speaking out of concern that wage systems weighted too much on “performance” could instill a sense of inequality among employees.

But the report opposes industry-by-industry across-the-board wage raises that are not based on a rise in productivity. It says employers should take into consideration their own companies’ ability to pay wage raises. The business organization stresses that Japan’s wage level is already among the world’s highest, topping those of the U.S., Germany and France, and doubling those of South Korea and Taiwan.

In a meeting with Mr. Tsuyoshi Takagi, president of Rengo (Japan Trade Union Confederation), the nation’s largest labor organization, Nippon Keidanren chairman Hiroshi Okuda said that the high prices of oil and other resources will continue to exert an upward pressure on production costs throughout 2006.

Mr. Takagi expressed his concern about the progress of polarization in Japanese society between the “haves” and the “have-nots,” and said that the behavior of enterprises can help stabilize Japanese society. Pointing out that business profits have been lopsidedly distributed to management in the past several years, he called on the business organization to “reward workers who have worked with perseverance.”

Rengo is calling for raises in monthly wages, which are permanent, rather than raises in bonuses, which are temporary. It says that disposable incomes for workers’ households in 2004 were more than 10 percent less than the peak attained in 1997. While the overall Japanese economy is on a path of recovery, gaps are widening between firms even within the same industry, and the benefits of the recovery are taking longer to trickle down to smaller companies. Gaps are also growing between the working conditions of regular workers and those of nonregular workers such as part-timers and temporary workers, who now account for more than 30 percent of the workforce. In this year’s spring labor offensive, Rengo for the first times tackles the issue of improving conditions for non-regular workers.

Given the current situation, across-the-board wage raises would be unrealistic. But Mr. Takagi’s call on management to acknowledge the beneficial effects on productivity of raising wages to secure quality workers is reasonable. Both management and labor need to reach a settlement that will help revitalize both workers and enterprises in the long term.

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