The result of the annual management-labor wage negotiations at major automakers and electronics firms, which set the trend across industries, appears to highlight the limitations of the Abe administration’s four-year-old drive to urge export-led businesses benefiting from the weak yen under its watch to share their increased profits with employees in order to shore up consumer spending. Increases in the workers’ base pay scale agreed on last week were smaller than last year’s at most companies, reflecting the firms’ caution over uncertainty in their business prospects.
While the continued wage increases are welcome, the raises do not yet seem robust enough to kick in the elusive “virtuous cycle” of higher corporate profits raising workers’ wages, boosting consumer spending and in turn generating more business investments.
For the fourth year in a row, the Abe administration kept up unusual pressures on the major firms to raise wages for their workers — specifically calling on the businesses to ensure that their employees would get at least the same level of wage hikes as in 2016. Consumer spending, which accounts for 60 percent of the nation’s gross domestic product, has remained weak even as the economy grew for four quarters in a row last year. Per-household spending in January fell 1.2 percent from a year ago for the 11th consecutive monthly decline. The administration’s bid to bust the long-running deflation was increasingly in doubt as consumer prices slumped for months in a row.
Despite the repeated calls, the automakers and electronics manufacturers were more guarded than in previous years toward significant raises. These sectors benefited heavily as the yen’s fall under Prime Minister Shinzo Abe’s policies inflated their profits to record levels, but the yen’s upturn since early 2016 clouded the prospects of their earnings. And while the yen began to fall again following Donald Trump’s election as president of the United States in November, the protectionist trade policy of the new U.S. administration was enough to put the manufacturers, many of whom rely a lot on U.S. markets, on guard.
Toyota Motor Corp., which expects operating profit in the business year to the end of this month to plummet 35 percent from the previous year, offered a ¥1,300 monthly increase in the pay scale, ¥200 lower than a year ago, against its union’s demand for a ¥3,000 raise. Nissan Motor Co., which last year met the union’s call for a ¥3,000 raise, offered half the raise. The raises on which the management and unions agreed on at electronics makers also declined from the previous year. Overall, the wages hike at the major firms will likely be the slowest since the Abe administration began its effort at orchestrating pay raises in the private sector. Commenting on the outcome of the wage talks, Abe said he wished the raises were “a bit more robust.”
There are signs of progress, however, in that this year’s management-union talks put on the agenda issues other than wages and bonuses that affect welfare of the workers, in particular the chronically long working hours of company employees. Before the talks began, Keidanren urged its member firms to take steps to eliminate overwork of their employees. Major electronics makers and their unions adopted a “joint declaration” calling it a common challenge for the management and labor to make maximum efforts to reduce the work hours of employees — though it fell short of setting numerical targets for cutting back on overtime hours or concrete steps to achieve that goal.
Much of these may be symbolic steps responding to the growing awareness of the overwork problem, following the 2015 suicide of a stressed-out 24-year-old worker at Dentsu Inc. and other “karoshi” cases, or the Abe administration’s “work-style reform” drive including efforts to curb the long working hours of corporate workers. It is still significant that these issues are being taken up as problems that the businesses themselves need to resolve. Even as the government introduces new labor regulations, including the planned cap on the overtime hours, it will ultimately depend a lot on the behaviors of individual companies to effectively curb the working hours of their employees.
Some of the major firms are taking concrete steps to prevent their employees’ overwork or enable flexible work styles in order to attract talented employees, such as the introduction of a system to ensure certain intervals between work hours to provide employees with enough rest and greater use of teleworking for employees who need to raise children or care for relatives at home.
Changing the conventional ways of work can be crucial for some businesses as they face a growing manpower supply shortage in the nation’s declining working-age population. In the wage talks at the major door-to-door parcel delivery firm Yamato Transport Co., the union made an unusual demand that the company trim the volume of parcels handled by its drivers — who have been burdened with the sharply rising volume of work with the rapid expansion in online shopping while the labor shortage in the distribution industry gets more serious. The company agreed to take steps to reduce the workload by reviewing its contracts with corporate clients, including rate hikes, and trimming some of the service for customers. It also reportedly plans to pay unpaid overtime wages to its roughly 70,000 workers.
It is a positive development that measures to address these issues were discussed in the management-labor talks.