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Date : 08-04-10 10:41
Japan Silent spring
 Writer : J&K
From The Economist print edition

THE annual wage negotiation between Japan's unions and its biggest companies is called shunto; the characters literally mean “spring struggle”. The closely watched outcome at a handful of firms—Toyota, Nissan and Mitsubishi, among others—serves as a benchmark for wages for the rest of corporate Japan. In the post-war boom years, shunto was regarded as a core element of Japanese stakeholder capitalism, on a par with lifetime employment, the seniority-wage system and cross-shareholding. But in recent years it has descended into empty theatrics.

During the “lost decade” of the 1990s, the unions shied away from asking for much. As the labour force changed—one-third of workers are now part-time or temporary, rather than “regular” staff—the unions' importance was diluted. In the past five years many of Japan's big firms made record profits, but they have not been sharing their good fortune with their workers. Take-home wages have remained stagnant and, in some years, have even declined over the past decade.

At the same time, the aggregate wage cost that firms bear has fallen sharply as expensive baby-boomers retire and cheap, non-regular employees take up the slack. The problem has become so severe that the prime minister, Yasuo Fukuda, uncharacteristically urged companies to pay their workers more. Even Japan's conservative business lobby, the Keidanren, has pushed firms to crack open their coffers.

This year's shunto ended this month with a hollow victory for employees. Most firms offered an increase in basic monthly pay of ¥1,000 (around $10). So futile have the talks become that the unions have shifted tack. They now focus on improving working conditions and are trying to narrow the income gap between regular and non-regular workers, notes Charles Weathers, an economist at Osaka City University, in a comprehensive paper* on shunto. The wage difference can be as much as 40%. The big buzzwords in Japan are kakusa kakudai (growing inequality) and waakingu pua (literally, “working poor”). Japan, once among the most egalitarian societies among industrialised countries, has become one of the least.

Strikingly, as the cost of imports such as oil and raw materials has soared, the price of finished goods has remained stable and profit rates have not declined much. What explains this odd situation? Kyoji Fukao, an economist at Hitotsubashi University in Tokyo, says that by paying workers less, companies have in essence boosted their productivity growth (by around 1.5%, according to preliminary data). But this saving may lead to problems in the future, he warns, because part-timers do not receive the same training as regular employees.

The Nikkei, Japan's business daily newspaper, reminds its readers that wages in Japan are ten times higher than in China. That might prevent workers from getting too uppity. Shunto was used to neuter militant left-wing unions in the 1950s. But then Japan grew its way out of its social problems, notes Mr Weathers. With a shrinking population and sluggish economic growth, that is no longer an option.