Pay hike slowdown must not become persistent trend in spring labor talks

Automakers, electrical appliance manufacturers and other major companies have responded across the board to their unions during the shunto spring labor wage negotiations.

Amid the coronavirus pandemic, many major manufacturers, including Honda Motor Co., Mitsubishi Heavy Industries Ltd. and IHI Corp., offered no pay-scale increases for raising the level of base pay for employees this year.

It must be said that the past trend of wage increases has stalled.

From 2014, the government had taken the initiative to prod companies to increase pay in so-called government-led spring labor-management negotiations, resulting in wage increases of more than 2% for seven straight years through last year. It is difficult to secure the 2% level this year, however.

The performance of major manufacturers is basically on a recovery track, mainly due to an increase in exports stemming from the economic recovery in China and the United States. Even so, the management side apparently could not wipe away future uncertainty.

The airline, railway and tourism industries are among those facing an even more difficult situation due to people refraining from going out as a measure against the novel coronavirus and a sharp drop in the number of foreign visitors to Japan. Japan Airlines offered no pay-scale increases and bonus negotiations are ongoing.

However, it is essential to continue wage increases in the long run so that companies heighten employees’ motivation to work and improve their performance. It is important for labor and management to reconfirm their cooperation to overcome the coronavirus crisis and ensure the slowdown in pay increases is only temporary.

Toyota Motor Corp., one of Japan’s leading companies, offered to meet the full amount requested by its union, increasing the total pay raise, including regular pay increases, by ¥600 from the previous year to a monthly average of ¥9,200. However, the level of increase was below that of two years ago and whether a pay-scale hike has been included was not disclosed.

Labor unions of six major electrical appliance makers, which have relatively strong business performance, all asked for a monthly pay-scale rise of ¥2,000. However, the companies’ responses varied, with Hitachi Ltd. offering ¥1,200, and Fujitsu Ltd. among others, offering ¥1,000.

The six electrical appliance makers’ unions used to make uniform demands and the management used to give uniform responses, but the system of lock-step wage increases has broken up since last year.

Unlike the days when the focus was on home appliances and semiconductors, each company recently has different areas of expertise, such as in infrastructure and information technology. The move toward a break from the lock-step mentality is a natural trend, and companies doing well should link the trend with steady wage increases.

The prolonged deflationary trend that began in the late 1990s was partly due to stagnant wages. Japan’s wages, which were once among the highest in the world, have sunk to the lower end among developed nations.

Corporate managers must reaffirm that companies with surplus capacity should raise wages as much as possible. Doing nothing but holding down wages can only lead to an outflow of human resources overseas.

The shunto negotiations among small and midsize companies, which account for 70% of all employment, are set to get into full swing. To prevent the recurrence of deflation, companies should make efforts to improve the treatment of employees.

— The original Japanese article appeared in The Yomiuri Shimbun on March 18, 2021.