The government’s draft guideline for narrowing the steep gap in wages and other conditions between regular full-time employees and workers on irregular contracts is a first step in the right direction. It still needs to be fleshed out — in the process of turning the guideline into legislative action as early as next year — to serve as an effective deterrent against unfair treatment of workers on the basis of their employment status.
The guideline, presented last week to the government’s council on “work-style reforms,” is the product of Prime Minister Shinzo Abe’s call for introduction of the “equal pay for equal work” principle to address the disparity between regular and irregular workers — a problem of growing importance as people on irregular contracts such as part-timers, those on term contracts and temporary dispatch staff have come to account for 40 percent of employed workers.
The expanding ranks of the generally low paid workers on irregular (and often unstable) contracts have been cited as a factor behind various socio-economic woes, including sluggish consumer spending, whose sustained recovery is seen as crucial to the economy’s revival. Government data show that workers on part-time contracts earn an average of about 60 percent of the hourly wage of regular full-time corporate employees — a gap that is likely steeper if bonuses and other benefits are counted. The Abe administration has set a goal of narrowing the earning gap between irregular workers and their regular full-time counterparts to the tune of 80 percent, as is more common in advanced European economies.
The guideline tries to lay down a set of rules on what sort of differences in the treatment of regular and irregular workers engaged in the same work should be accepted as rational or eliminated as irrational. It sets a principle that workers’ basic wages must be equal irrespective of their employment status if the key criteria that determine their pay — job experience and capability, performance and results, and duration of employment — are the same. If the workers differ in their experience, skills, performance and the length of service with their employer, their pay should differ accordingly, it says. Whereas not a few companies offer no bonuses to their irregular workers, the guideline calls for bonus payments to them as well if their company pays bonuses to their regular employees, with the amount to be similarly set according to their experience and performance.
The guideline also makes it clear that allowances and benefits, such as commuting allowances, overtime pay, late-night and holiday work allowances, as well as holidays and use of facilities such as company cafeterias, must be provided equally to workers irrespective of employment status.
When Abe put the “equal pay for equal work” rule on his policy agenda — which was surprising given his record of mainly pro-business policies — one obvious concern was how that principle would fit in Japan’s prevalent employment practices, in particular the seniority-based pay system based on lifetime employment at many companies, where often loose job descriptions make it hard to define what constitutes “equal work.”
In accommodating wage differences based on job experience, performance and the duration of employment with the firm, the guideline appears to set a practical goal that takes into account the prevailing labor practices in this country. It also leaves room for differentiated treatment of workers on grounds of different career path or duties imposed on the employees.
One major question is that while accommodating wage differences based on job skills, experience or performance, the guideline does not provide for an objective criteria to determine each worker’s skills, experience or performance. The judgment of whether specific workers differ in their skills or performance will be left in their employers.
In the course of discussions at the government panel, representatives from labor circles demanded that employers be obliged to explain and provide grounds for differences in the wages of their workers. But that was not included in the draft guideline. Since most of the workers on irregular contracts are not unionized, it will be difficult for individual workers to ask their employers to explain or correct what they perceive to be unfair treatment based on their employment status.
As it stands, the guideline has no legally binding power over employers. How to turn the draft into an effective tool with teeth to ensure that workers will not be disadvantaged solely on the grounds of their employment status must await the legislative actions that will be prepared on the basis of the guideline. It marks a first step toward improving the conditions of irregular workers by setting basic rules, but a lot more needs to be done to ensure that the rules will be followed in practice.