The annual labor-management wage talks effectively got underway with the top-level meeting this week between Keidanren (Japan Business Federation) and the Japanese Trade Union Confederation (Rengo), with both sides concurring on the importance of wage hikes. The momentum for higher wage hikes appears to be building with Prime Minister Shinzo Abe specifically requesting a raise of 3 percent. Despite a continuing expansion of the nation's economy, growth in consumer spending remains weak and uneven as wage increases stagnate. Businesses posting record profits should consider higher pay raises for their employees as their performance and financial resources allow.
It is a different story, however, whether this decades-old formula of wage negotiations — in which the top business lobby and the largest labor umbrella organization set the direction and talks at leading firms in each industry — remains relevant in the nation's rapidly changing and increasingly diverse business landscape. Questions should be asked about whether the annual event of wage talks — which is marked by the deep-rooted herd mentality among Japan's big businesses — continues to be the right formula to increase the wage levels of workers, beef up the international competitiveness of Japanese companies or is appropriate at a time when the government is advocating diverse ways of work in its work-style reforms.
In its guideline for member firms in the upcoming talks with their unions, Keidanren referred to the call from the Abe administration for a 3 percent wage hike as a "request from society." It is quite rare for Keidanren to mention a specific figure in the wage negotiations that take place between the management of individual companies and their unions each spring. A wage increase of 3 percent or more has not taken place since 1994 — before Japan's economy suffered the weight of persistent deflation.