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Salaries of central government workers have been criticized for exceeding those of workers performing related duties in the private sector, which has undergone drastic restructuring in recent years. So, the National Personnel Authority, in its report to the Cabinet and the Diet, recommends no change in basic monthly pay and bonuses for national public servants in fiscal 2006.

The recommendation, which applies to about 300,000 desk workers, is expected to encourage a reduction in the salary-level gap between government and private-sector workers. As the government pushes financial reconstruction, though, it needs to find ways to keep up government workers’ morale.

This year the authority changed the criteria on which it bases its recommendations. In the past, the authority had made its recommendations after surveying pay scales at companies employing at least 100 workers. Amid the struggles of financial reconstruction, however, private-sector representatives on the Council on Economic and Fiscal Policy (chaired by the prime minister) thought that too much weight had been given to large companies in the survey. They proposed that the authority pay more attention to smaller companies.

As a result, the authority this year surveyed the pay of some 430,000 workers at some 10,200 companies, each employing 50 or more workers. The change in criteria is the first since 1964, when Prime Minister Hayato Ikeda and Kaoru Ota, then chairman of the General Council of Trade Unions of Japan, agreed that the survey should cover companies with 100 or more workers.

The latest survey found that basic monthly pay in the private sector averaged only 18 yen more than the corresponding pay for national government workers, and that private-sector bonuses, worth 4.43 months’ pay, was only marginally below the 4.45-month-equivalent bonuses in the public sector. The authority said average yearly income for administrative workers is currently 6.323 million yen, with the average age of workers at 40.4.

While recommending that monthly pay and bonuses for central government workers remain at the fiscal 2005 level, the authority did favor raising the monthly child allowance for third and additional children from 5,000 yen to 6,000 yen, starting in fiscal 2007.

Changing the survey criteria could save 94 billion yen. Savings are expected to be bigger if local governments follow the authority’s recommendations. The central government plans to slash personnel costs for central and local government workers by 2.6 trillion yen over the next five years.

If the old criteria had been used, the authority would have faced the question of whether to recommend raising salaries for central government workers. Due to the improvement in overall economic conditions, at companies with 100 or more workers, basic monthly pay had increased by 4,252 yen, or 1.12 percent, and bonuses had gone up by an equivalent of 0.05 month’s pay for a total average annual rise of 90,000 yen. (For fiscal 2005, the authority had recommended cutting basic monthly pay by 0.36 percent while raising bonuses by an equivalent of 0.05 month’s pay — all of which translated into a cut of 4,000 yen, or 0.1 percent, in average annual income.)

With the new criterion, the portion of private-sector workers covered by the survey increased from 55 to 65 percent. If the personnel affairs committees of local governments follow the authority’s pay recommendations, as they usually do, the gap in salary levels between local government workers and private-sector workers in prefectures and municipalities is expected to diminish. Local committees should ensure that the true salary level of private-sector workers in their communities is reflected when they make their pay recommendations for local government workers in September.

One difficulty arises, however, in trying to strictly match the salary level of civil servants with that of private-sector workers. The inclusion of workers at smaller companies in pay surveys may lower proposed pay levels to the extent that some jobs become unattractive to talented civil servant applicants. In fact, the number of college graduates who want to become government workers has been on the decline.

To lift civil servants’ morale, the government should consider changing the current rigid personnel system under which positions, and hence salaries, are set according to seniority and education backgrounds. It should introduce a pay system that takes into account workers’ abilities and actual performance. The challenge here, of course, is to develop a method of evaluating performance in a fair manner.

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