Japan Press Weekly

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2008 November 19 - 25 TOP3 [LABOR]

Toyota keeps 13 trillion yen in reserve, enough money to employ temps as full-time workers

Toyota, Nissan and other major Japanese automakers have announced plans to cut full-time jobs, ostensibly to cope with expected declines in sales to the United States due to the ongoing financial turmoil.

The number of contingent workers at Toyota reached 80,000

Japanese car manufacturers have made enormous profits by using extremely low-wage contingent workers. For example, while the average full-time workers at Toyota receive about 8.3 million yen, fixed-term workers earn only 2.2-2.5 million yen per capita although they work on the same assembly line as full-time workers.

Toyota Motors began to use contingent workers on a massive scale in 2003. By 2008, the number of such workers increased from 8,000 to 18,000. The total number of the Toyota Group’s contingent workers doubled to 87,000 from 40,000 during this same period.

The group was successful in substantially increasing their current profit for FY 2007. Its internal reserves increased to 13.9 trillion yen from 9.5 trillion yen in the FY 2003-2007 period. The auto giant accumulated its huge internal reserve by exploiting contingent workers.

And now, Toyota Motors is about to fire the fixed-term workers who contributed to accumulating the internal reserve on the grounds that a fall in profits is expected. Actually, these workers have constituted the largest source of Toyota’s huge earnings.

If temporary and fixed-term workers are promoted to full-time positions, it will help to stabilize the employment situation. It will also help in increasing domestic demand. That is an essential challenge for economic growth to be driven by increasing domestic demand. The Japan Research of Labor Movement (Rodo-soken) estimates that if 3.63 million non-regular workers are promoted to full-time positions, this will encourage people to spend an extra 5 trillion yen and push up Japan’s GDP by 0.8 percentage points. In contrast, the cash handouts of two trillion yen that the government plans to implement apparently as an election ploy, is thought to increase the country’s GDP only by 0.1 points. It is clear that promoting contingent workers to full-time positions will be 8 times more effective than the cash handouts.

To promote contingent workers to full-time positions is possible if only employers have the will to do so. Cardboard maker Rengo decided to directly hire its 1,000 temporary workers. According to its managerial index, Rengo earns 10 billion yen in ordinary profits and has 120 billion yen in internal reserves, or 12 million yen per each one of 10,000 employees. By providing 1,000 temporary workers with full-time positions, the internal reserve per worker will decrease to 11 million yen.

Rengo says that by promoting temporary workers to full-time positions, it will maintain a sufficient workforce to continue stable production. It estimates that although annual labor costs will increase by several hundred million yen, it can raise the morale of workers and this will contribute to production efficiency.

No need to worry about adversely affecting group companies

If Toyota’s subsidiaries promote temporary workers to full-time positions, it will not negatively affect their businesses, as their managerial index indicates. The total amount of internal reserves of all Toyota group companies is 13.9 trillion yen, or 44 million yen per each of 316,000 employees, which is about four times more than Rengo’s internal reserve. If they regularly hire all of their 87,000 non-regular workers (temporary and fixed-termed contract workers), they will still have 34.5 million yen of internal reserves per each of 403,000 workers. There is nothing to be worried about their group companies.

Like Toyota, major corporations have enough financial resources to turn their non-regular workers into regular workers.

According to the Japan Research Institute of Labour Movement, employers need eight trillion yen to hire 3.63 million non-regular workers as regular workers. It is possible for them to do so by using 228 trillion yen, or 3.5 percent of their internal reserves. Now is the time for Japan’s major corporations to take their social responsibility to protect employment seriously.