Views on and Counterarguments to the 2010 Report of the Committee on Management
and Labor Policy of Nippon Keidanren (Japan Business Federation)
Nippon Keidanren released its Report of the Committee on Management and Labor
Policy (hereafter, the Report) on January 19, 2010. In spite of the enormous
changes that have taken place in the basic requirements and conditions for
the further growth of companies and society, the Report is mired in micro-level
logic throughout and fails to go beyond the traditional argument for cutting
total personnel expenses.
Would it not be appropriate for Nippon Keidanren, as an organization of managers,
to show a willingness to tackle and overcome the economic and social stagnation
that Japan faces, such as deflation?
While recognizing the role of companies in the distribution of added value,
the Report maintains that “There is a need for a dialogue, in line with
the real situation, on whether or not to maintain the wage curve” in
wage negotiations. Furthermore, it proposes a review of the systems such as
scheduled wages that have been established over a long period of time between
labor and management. Changing systems like these could lead to a destabilization
of labor conditions and weaken the relationship of trust between labor and
management. Thus, such moves cannot possibly gain the confidence of society.
Employers have traditionally maintained an attitude focusing on holding down
total personnel expenses and implementing cost reductions based on the simplistic
idea that cost cuts are equivalent to strengthening international competitiveness.
It should be noted that this has led to a vicious cycle at the macro level
of wage stagnation, leading to anxiety about life and employment, and in turn
causing sluggish consumption accompanied by a lack of demand, resulting in
a deterioration of business.
The business stance of turning fixed costs into variable costs has also led
to an increase of non-regular workers and a widening of social disparities
to a degree that can no longer be overlooked. In addition, the problem of employment
among youth and the working poor has even become a social issue.
On the other hand, on the shop floor, the quality of employment has deteriorated,
problems involving a lack of skilled personnel have surfaced, skills are no
longer being passed down, and teamwork has suffered, leading to secondary effects
including a degradation of product quality, causing ironically a decline in
competitiveness. It can be said that the attitude of looking at personnel expenses
simply as costs without adopting a long-term point of view, in combination
with the government’s neoliberal economic policy, has triggered “long-term
stagnation that has lasted over 20 years.”
What management needs to adopt is not an attitude that gives priority to
micro-level business logic such as “international competitiveness” and “cost
cuts” (meaning cuts in personnel expenses) but rather efforts, based
on management’s responsibility, to allay workers’ anxiety concerning
employment and their future as workers. Otherwise there will no future for
company management and it will be impossible to regenerate Japan.
We are no longer in an era where the decisive factor in strengthening competitiveness
is cutting costs. In order to cope with the emerging economies, many in Asia,
which are steadily strengthening their capability, it is critical to enhance
added-value competitiveness rather than cost competitiveness. To do so, companies
must have innovative power and strong technological development capabilities.
It is the efforts of real people on a long-term rather than short-term scale
that result in the capability for new innovation and technological development.
This is what makes sustainable development possible.
Nippon Keidanren should exercise leadership toward its member companies concerning
the importance of stabilizing employment and working conditions in the long
term, actively investing in people, and properly nurturing “human resources.” Otherwise,
their competence as an organization of employers will have to be called into
At the same time, we do need to reconsider Japan’s employment structure.
It is necessary to point out that behind the problems of widening disparities
and the increase of non-regular workers, which have become major social issues,
is the approach of so-called “employment portfolios” proposed in
1995 by the Japan Federation of Employers’ Associations, which is now
part of Nippon Keidanren. This report was a statement aimed, from the perspective
of employers, at eliminating the practice of long-term employment, which had
been maintained until that time. With this as a turning point, a step toward
the increase of non-standard employment was taken.
The absence of any self-reflection whatsoever on the attitude which led to
the excessive growth of non-regular workers thus far and the ironic heaping
of praise on such actions, based on claims that “The diversification
of employment has brought merits to the labor market” needs to be condemned
as an expression of the one-sided logic of employers.
Further, it is deplorable that they adopted the attitude of refusing to accept
responsibility as an involved party, stating that the rapid increase of the
non-regular workers was partly caused by the fact that “The needs of
labor suppliers and users coincided” and that “Tertiary industry,
which traditionally has employed many non-regular workers, has expanded.”
Employers should share an appropriate portion of the burden for rectifying
the problem of the widening disparities in society. In reference to the “relationship
of trust between labor and management,” they should promote a switch
to regular workers and improve the treatment of non-regular workers in order
to restore the Japanese-style employment system based on the principle of long-term
employment. They should, as representatives of the business community, communicate
their way of thinking to the society based on the role of management, making
proposals, for example, to the government on the future design of Japan, new
needed industrial structures, etc.
RENGO believes that we must act to prevent any further decline of the wage
level in the 2010 Spring Struggle for a Better Life in order to put the economy
back on a recovery track and protect the livelihoods of workers. To achieve
this goal, we will work to rectify the growth pattern that relies excessively
on overseas demand and rectify the skewed distribution pattern that favors
companies. We will also raise the standard of living by turning non-regular
workers into regular workers and improving their treatment and raising the
minimum wage level, thereby rectifying the employment structure.
The Japanese economy has all the elements required to realize mid- to long-term
growth, such as capacity for technological development and international competitiveness.
What is required now is to take active measures toward stable growth, improved
lives for the people, and an economic society that is in harmony with the world.
If companies and the government promote a policy for increasing domestic and
foreign demand from a medium- to long-term point of view, the economy will
Next, we will present our views on specific points in the Report, based partly
on the above-mentioned points of view.
2. Concrete Views
(1) Maintenance of the wage curve and review of the system of annual
The Report not only states that “It is necessary to conduct a dialogue,
in line with the real situation, on whether or not to maintain the wage curve” but
argues that “Even in cases where added value increases, the basic principle
should be to reflect temporary business fluctuation based on short-term fluctuations
of supply and demand into bonuses and one-time allowances” and that “Many
companies believe it is difficult to raise the base wage,” taking a
thoroughgoing position of holding down wages. If such moves are strengthened
without giving due consideration to the ill effects of controlling wages,
it will be surely make personal consumption even more sluggish and further
exacerbate the deflation spiral.
The Report further states that the system of annual wage hikes is premised
on continued high growth and that “Under the system and practice where
scheduled wages automatically increase from the previous year, control over
total personnel expenses is inadequate.” Let us point out that the
funds used for annual wage hikes are basically internally generated and do
not directly lead to a rise of personnel expenses. Moreover, since this system
is the foundation of the personnel management system, arguing for a review
with the aim of cutting costs is a serious problem undermining the trust
between labor and management. The arguments in favor of reviewing the system
of annual wage hikes, implying that any measures are needed to hold down
total personnel expenses, cannot be condoned.
(2) Improving the treatment of non-regular workers
Although the Report speaks approvingly of the diversification of employment,
when it comes to labor conditions, it maintains that “A careful response
should be made after fully considering whether such issues can be solved
through individual labor-management relations.” This seems to demonstrate
a lack of reflection as a party responsible for the increase in non-regular
Today, as the labor market undergoes change, it is essential for labor
and management to work for equal treatment. We look forward to seeing constructive
proposals from employers.
With regard to the idea of equal pay for work of equal value, the Report
states that with the precondition that “the same added value be brought
to the company taking into consideration the factor of future use of personnel,” equal
treatment should be provided. We consider this, in reality, to be equivalent
to denying the principle of equal pay for work of equal value.
The Report also states that the idea that workers who on the surface
seem to be engaged in the same work should receive the same treatment is
problematic. We must say that the Report shows a lack of understanding of
the intent of the revised Part-time Workers Act.
(3) The labor share
Up until last year, when the labor share was low, the employers’ side
maintained that “The labor share should not be the basis for deciding
wages.” However, when the ratio rises, like it has done this year,
they claim that the distribution is fair. Thus, their arguments change depending
on the situation. The same can be said about the “productivity standard
principle,” under which wage raises are kept below the rise in productivity.
The Report also maintains that RENGO’s position that “The labor
share has not risen excessively” is based on a misunderstanding of
reality. However, this is because the two sides use different calculation
methods. The employers’ side uses sales as the denominator. If this
method is used, then the labor share rises naturally during recessions. On
the other hand, RENGO’s calculations are based on GDP. When the trend
in this figure is examined, it is clear that the labor share dropped sharply
after the present economic expansion period began, and has hovered at a low
level with little fluctuation since then. While similar statements can be
found concerning added value, here also, Nippon Keidanren and RENGO calculate
the values in different ways.
(4) Dividends on equity and executives’ remuneration
The Report states that “The payout ratio, an indicator of profit
sharing with stockholders, is at a low level” and “Which of the
stakeholders will receive priority in the distribution of added value depends
on the actual situation and level of growth of the company in question,” holding
firm to the principle of shareholders first. Here, a negative attitude toward
the rectification of the skewed distribution can be observed. It is clear
that the failure of companies to distribute the fruits of growth to workers
has led to the present serious problem of widening disparities. This attitude
The Report also states that “Some have criticized the fact that profits
were distributed to the stockholders during the business expansion period,” but
RENGO has argued that while the distribution to the workers was kept at a
low level, the distribution to the stockholders and executives led to the
expansion of the disparities. We have not argued in favor of increasing the
labor share or raising wages by cutting the share to stockholders.
(5) Minimum wages
The Report takes a very negative stance toward raising minimum wages, saying: “Constant
improvements in productivity at small and medium enterprises are a precondition
for increasing minimum wages” and “The effect of an increase
in personnel expenses would be insignificant for small and medium enterprises
that face a very severe management environment, and would have an enormous
impact on new employment and employment stability, making it impossible to
ensure the feeling of security of working people.”
The role of the minimum wage system, however, has become ever more important
considering the fact that people with an annual income of 4 million yen or
less now account for close to 60% of all working people. It is necessary
to continue to raise the level of Japan’s minimum wages, which have
long been kept low.
With regard to the specified minimum wage (by industry), the Report this
year again repeats the traditional argument that “The specified minimum
wage system is superfluous, and should be abolished.” This ignores
the intent of the revised Minimum Wage Act, and amounts to a negation of
(6) Work-life balance
The Report states, “We need to put our minds together to review ways
of working, particularly considering that total actual working hours have
decreased.” We concur with this way of thinking. In order to rectify
the situation of long working hours, it is important for companies to properly
regulate working hours and deploy personnel properly given the amount of
work and the production plan of the business project. By doing so they should
show that they are making serious efforts to rectify long working hours.
We expect that Nippon Keidanren will demonstrate leadership in this regard.
It is unfortunate, however, that the work-life balance advocated by employers
is based on the “realization of work-life balance by raising productivity” and
is seen only as a means to hold down wages.
The Report also states that “It is important to develop a policy from
the viewpoint of promoting efforts by individual labor and managements without
leaving the issue to legislation,” but there is a need for efforts
including legal measures in areas such as the improvement of work rules.
(7) The wage premium for overtime work
With regard to the requirement to make efforts to raise the overtime premium
in accordance with the amendment to Labor Standards Act, the Report states
that “It is necessary to take note of the effects of raising the overtime
premium on total personnel expenses.” It should be said that this argument
comes from a lack of understanding of the intent of the amendment of the
law. The general tendency in the world is: a 50% overtime wage premium, and
a 100% premium for holiday work. The premium in Japan should be increased
in order to raise the appraisal of the labor value too.
(8) Employment among youth
The ratio of new graduates in the spring of 2010 who had obtained informal
job offers by December was 73.1% for university graduates and 68.1% for senior
high school graduates. Both these figures were the lowest since such statistics
have been compiled, and the rate of decline was the largest ever, calling
for an emergency response.
The Report also states, “Individual companies are expected to make
efforts to hire as many newly graduates as possible including through year-round
recruiting.” We would like to put our faith in the sense of social
responsibility of companies. The problem of youth employment is a social
issue. We believe that constructive discussions between labor and management
are necessary on where and in what way to create jobs concretely, followed
by talks with the government to hammer down the details.