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Japan Press Service Co., Ltd. is the only news agency providing information of progressive, democratic movements in Japan

Merit-based pay system restrains wages

A Cabinet Office study published on February 10 pointed out that the performance-based wage system has led to wage restraints.

This analysis is noteworthy in that it was done by the government concerning the problematic merit-based wage system widely adopted by large corporations.

The report compiled by the Cabinet Office Economic Research Bureau points out that corporate restructuring schemes put greater emphasis on the survival of companies than on employees' wages, and that a high indebtedness ratio has led to wage restraints. The report added that the introduction of the merit-based pay system may have contributed to the wage restraints.

The report also said that company profitability has almost nothing to do with the performance-based wage system although the system is generally believed to motivate employees and improve corporate performance.

Attached charts to the papers show that wage gaps are wider in merit-based pay corporations. - Akahata, February 15, 2006