Opinion

Vol.40-No.9 September 1,2001

Opinion

The 2001 Spring Labor-Management Negotiations
Hiroyasu Kawamoto Deputy Director, Labor Relations Division Nikkeiren (Japan Federation of Employers' Associations)

This year's spring negotiations were carried out at a time when the U.S. economy was showing signs of slowing down, when unemployment was increasing in Japan, and when the exchange rate and share prices on the stock exchange were still a bit shaky, with the situation getting worse every day.

A mid-term picture of the environment to the negotiations was marked by the fact that many Japanese firms were still struggling after the prolonged recession following the collapse of the bubble economy. Evidence of this can be found in the high ratio of labor share, the low returns on equity, and the low ratio of net worth. The 21st century began under rather peculiar circumstances: the unprecedented level of international competition that has accompanied globalization, the rapid spread of information technology, the increased interest in the environment, and the graying of society.

Management approached the spring negotiations with the claim that Japan's wage levels were among the highest in the world, and labor share was also high among the developed countries. To maintain international competitiveness and to give priority to employment stability, management argued that every effort should be made to contain total labor costs within the ability of firms to pay. Management thus argued that companies' gains from the improvements in value-added productivity should first be passed on as employment security, and then through bonuses.

On the other hand, the labor unions called for some increase in the basic wage rate with the age-wage profile being maintained so as to facilitate the expansion of consumption. The lines were thus drawn for a tough round of negotiations, as in the previous year.

The outcome was a wage increase (calculated from the weighted average of 209 major companies as compiled by Nikkeiren) of 1.93 percent (compared with an increase of 1.97 percent the previous year). This was the lowest wage increase since the first spring wage negotiations were launched in 1956.

Several features of this year's negotiations deserve mention.

First, with the economy becoming increasingly globalized and competition being heightened owing to deregulation, differences in business performance among industry and among companies were more conspicuous due to the prolonged recession. While negotiations between labor and management were intense, the overall pattern was that wage decisions came to rest more on the individual responsibility of firms and unions within the ability to pay. This has been reflected in greater variation among firms than before. On the whole, this year's wage hike resulted in the lowest level.

Second, the relative wage increase in manufacturing was the same as last year, but that in the non-manufacturing sector was lower than last year.

Third, the negotiations were conducted with reference to total labor costs, including wages, bonuses, retirement benefits and pensions, fringe benefits and employment security.

Fourth, the level of bonuses was determined more by performance of individual firms. Also, more bonus schemes came to link performance, spreading from the electric industry to other industries as well.

Fifth, as some firms have been moving away from personnel and wage systems with a heavy emphasis on seniority toward systems which emphasize achievements, the average annual increment fell in some firms.

In this era of intensive competition, differences in the business performance of firms and industries have been widening. Accordingly, there has been a move away from negotiations to work for a standard across-the-board uniformity in wage increase levels, which are now losing their meaning. As a result of these changes, the nature of the spring negotiations are likely to undergo further changes in the future.

With the situation surrounding business management becoming more uncertain, labor and management will need increasingly to have a shared understanding of the macro-economy, the labor market situation, and changes in the business environment as they impinge upon individual companies. In addition they will need to come to grips with the crisis that is engulfing their businesses. On that basis they will be able to manage their total labor costs so that employment levels can be maintained and they will be able to move ahead with meaningful discussions on how to deal with various issues, including a fundamental reassessment of personnel policies and strategies for wages, retirement benefits and other welfare benefits, improving productivity, extending employment, and the provision of education and training.

Over the next few years firms will need to prepare for more varied employment patterns and working arrangements to meet the diversified needs of the labor force. Being able to provide various work/lifestyle options will contribute to job creation and maintenance while also building a society where individuals can demonstrate fully their abilities.

The 2001 Spring Struggle for a Better Life
Tomoru Yamaguchi Division Director Working Conditions Division Department of Working Conditions Rengo (Japanese Trade Union Confederation)

Rengo's policy for the spring offensive in 2001 was based on the shared perception that it would be difficult to achieve anything in this offensive using the same basic approach that has been used in the past. Accordingly, there was a strong sense that Rengo must take the first step towards reconstituting the annual campaign for improved working conditions so that it did not continue as a mere repetition of the traditional way of doing things.

First, unions demanded a one percent increase in the basic wage as a rough target. This was apart from the annual increment. The specific demands were left to the decision of industrial federations individually. We also sought to step up the campaign for a comprehensive improvement in the lifestyle of employees by calling for a uniform approach concerning collective agreements in order to achieve an increase in payments for overtime and extensions to the period of employment for workers aged 60 and over. Moreover, unions affiliated with Rengo decided to work on selected issues, such as enterprise-based minimum wage agreements and a wage hike for part-time workers. By tackling these issues in a coordinated fashion, Rengo aimed to strengthen the sense of solidarity among all employees through mass action. It was hoped that this approach might have a spill-over effect and impact on the campaigns waged by small and medium-sized unions on the efforts of workers who do not belong to any union. In line with this, Rengo took the initiative in organizing company and industrial unions in a coordinated effort to tackle common concerns and to track management responses to union demands.

This year's spring offensive resulted in an average hike of ¥5,949 (a 1.93 percent increase). This was slightly lower, by ¥31, than last year's figure (and down 0.02 percentage points from the increase won in the spring of 2000). Since the individual wage increase was in some cases positive, this year's negotiations may be seen as just about halting the downward trend which occurred over the past several years. Nevertheless, the offensive ended unsatisfactorily in so far as the impact on the macro-economy was concerned.

In the end the union's push to expand individual consumption through improved wage levels that would lessen the sense of anxiety about the future felt by many employees did not make much headway. In the end the arguments that emphasized the need to cope with deflation, intensified competition in international markets, and structural changes, such as the increasing differential in the performance of firms seemed to win out. Accordingly, unions were not able to make headway in presenting their macro-economic viewpoint in individual negotiations between labor and management. With wages increasingly sensitive to each company's business performance and worker output, it is essential for labor unions to approach these kinds of issues in a more rational fashion.

The failure to systematically discuss matters beforehand to the extent necessary meant that the decision to have all the unions tackle the most important tasks together as a united body achieved little more than involving a larger number of unions in the offensive. However, many unions have come to have a fuller sense of the social significance of the national center. Also, Rengo's activities had a great effect in raising the consciousness of many involved in these issues by posing various questions internal and external to the organization. In other words, the first step has undoubtedly been taken towards reformulating the way future spring offensives will be conducted. In the future it will be necessary to hold discussions to work out a better approach for industrial and enterprise-based unions. These efforts will also result in Rengo organizing itself so as to clarify the role of each unit involved and to strengthen the functions of its internal departments. It is also becoming more important for Rengo to consider a wider range of issues, including work-sharing and the constitution of a “non-age limit” society for highly motivated elderly workers. It will have to consider further how best to forge some kind of social consensus between labor and management groups concerning what is most feasible.

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