Japan Press Weekly

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2008 December 17 - 22 [LABOR]

Keidanren report calls for wage restraint and goes against best way to rebuild Japan’s economy

In its annual report on management and labor policy published on December 16, the Japan Business Federation (Nippon Keidanren) committee virtually confessed that their policy of maximizing profits through using as many contingent workers as possible and promoting a performance-based pay system is at a serious impasse.

Revealing a sense of crisis

With the economy experiencing a steep downturn in the wake of the global financial crisis dubbed as the failure of “casino capitalism,” the report states that capitalism is under a serious threat and that this is the “third crisis” after the oil crisis in the 1970s and the burst of the economic bubble in the 1990s.

The remedy for the present Japanese economy should be to replace the economic policy of heavily depending on exports with one of boosting domestic demand by sustaining employment and thus enabling people to spend money. Large corporations with capital assets of more than one billion yen have amassed 230 trillion yen in internal reserves even though they are reporting reduced profits. These corporations should return part of their profits to workers and small- and medium-sized businesses that they exploited.

However, emphasizing that the major task now is for Japanese corporations to increase international competitiveness, the report proposes restraining wage increases.

This is a major setback from last year’s report that referred to the need to increase domestic demand by building an economic structure with corporations and households working in tandem.

President Mitarai Fujio in his foreword to the report states that corporations should not only seek sales turnover and profits but also contribute to society, state and the world, and win their trust. But the report neglects to address the people’s living conditions and the need to rebuild the Japanese economy, with no hint of recognizing the need for corporate social responsibility.

Total lack of concern for workers’ well-being

It is surprising that the annual report states nothing about the large numbers of contingent workers, in particular fixed-term contractors and temporary workers, being fired before the expiration of contracts or being denied renewal of contracts as reported almost everyday by the media. This is a major issue in politics today. The report just states that an increase in unemployment is a matter of great concern, revealing business circles’ total lack of concern for workers’ well-being.

The report also asserts that “labor and management should work together” to achieve stability in employment as a primary challenge in the upcoming labor negotiations in the “Spring Struggle.”

Clearly, the business sector is attempting to restrain wage increases as much as possible by arguing “jobs come first over pay raises,” but companies are already cutting full-time jobs. Their true intention is to destroy both jobs and wages. However, this will only contribute to discouraging households from spending money and making it increasingly difficult to achieve economic recovery.

Two major strategies

It is noteworthy that the business sector’s two major strategies - the use of more contingent workers and the introduction of a performance-based wage system – have proven to be failures. Corporate Japan has promoted these two strategies as part of the so-called “Japanese Management in the New Era” approach launched in 1995 by the Japan Federation of Employers’ Associations (which later merged with the Japan Federation of Economic Organizations or Keidanren to form Nippon Keidanren).

In its previous annual reports on labor and management, Nippon Keidanren advocated “diversity (of human resources)” to encourage the use of contingent workers such as part timers, temporary workers, and fixed-term contract workers, and the introduction of a performance-based wage system, which is based on the concept that “wages should be paid in accordance with workers’ abilities, performance, and contributions.” It is in this context that Nippon Keidanren has been playing a key role in easing regulations in the Worker Dispatch Law as well as the Labor Standards Law.

Nippon Keidanren in this year’s report states, “Doors will be wide open to those who want long-term employment opportunities.” Regarding the performance-based pay system, the report claims it should be replaced with a pay system based on “job, role, and contribution” and that evaluation should be impartial.

The report is unable to call for the Worker Dispatch Law to be further eased.

Even the government annual “White Paper on Labor Economy” points out that an increase in the number of contingent workers and the application of the performance-oriented wage system have widened the gap between rich and poor and increased frustrations and anxieties among the public. The Nippon Keidanren report virtually admitted that corporate Japan is at an impasse.

In the 1970s, workers marched in demonstration to Keidanren headquarters because they were angered by big corporations’ making easy money at the expense of the workers.

More than 30 years have passed since then. Protests against big business’s arrogance including dismissal of contingent workers are increasing.

If the business sector refuses to correct its obviously failed policy by saying, “After us the deluge”, we have to set it right by using the force of public opinion and our continuing struggle.