Slowdown of world economy casts shadow over pay hike negotiations

The Yomiuri ShimbunThe uncertain prospects of the world economy are casting a shadow over this year’s shunto spring wage negotiations. Pay levels must be raised steadily to shore up the economy.

In this year’s shunto talks, major businesses in the electrical appliance, automobile and other industries offered wage increases across the board. It is notable that the margins of the pay hikes are smaller than those agreed upon the previous year.

As for pay-scale increases — which raise the level of base pay — an agreement has been reached on a monthly hike of ¥1,000, which is ¥500 lower than that recorded in the previous year, at leading electronics makers including Hitachi, Ltd. and Panasonic Corp.

Given the slowdown of the Chinese economy and other factors, firms have one after another revised downward their earnings forecasts for the business term ending in March. This is because their management was concerned about deterioration in their earnings environment.

A symbolic move in this regard has been made by Toyota Motor Corp., which sets the tone for shunto negotiations.

Its labor union demanded a monthly pay raise of ¥12,000, which included pay-scale and regular pay increases. As this was significantly different from the pay hike planned by the management side, negotiations continued until the day set for the collective announcement of pay hikes by carmakers for the business year starting in April. The agreed pay increase of ¥10,700 is ¥1,000 lower than in the previous year.

The government-driven labor offensive, in which the government calls for pay raises, had continued since 2014. As a result, monthly pay raises of more than 2 percent, including pay-scale and regular pay hikes, have been realized. This year, however, the government did not mention a concrete pay increase target, so the pressure on firms to raise wages has undeniably weakened.

Nevertheless, corporate profit levels as a whole are high in general. Internal reserves amount to about ¥450 trillion.

Pass profits to employees

It is understandable that the management side feels an increasing sense of urgency. But they are called on to move forward with passing profits on to employees as much as they can, without shrinking back excessively.

Continued pay raises are expected to expand consumption and thus boost economic growth rates, thereby also benefiting businesses.

It is worth noting that major electrical manufacturers are showing moves to reexamine unified negotiations on across-the-board pay hikes. These moves have emerged because their business operations have diversified and there are big differences in their business achievements.

A unified negotiations formula is a reassuring system for labor unions of companies with poor business results. The matter calls for prudent discussions.

Regulations on overtime work will be introduced for big businesses from April. A private institution estimates that total overtime payment will decrease on a scale of ¥1 trillion a year as a result of the reduction in overtime.

Reduced working hours should lead to improved productivity. At the same time, it is imperative to study countermeasures to make up for the drop in overtime payments. One idea would be increasing bonuses or allowances, or both.

In labor-management negotiations at large firms, attention was focused on improving the treatment of employees hired again after mandatory retirement and nonregular workers. Spreading moves to provide and expand allowances represent a step forward.

Labor-management negotiations at small and medium-sized firms will go into full swing in the days to come. A consumption tax rate hike to 10 percent is scheduled for October. It is essential to spread the pay raise drive to small and midsize companies, which employ 70 percent of the workforce.

(From The Yomiuri Shimbun, March 15, 2019)Speech


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