Government-made Wage Growth

The spring labor offensive 2014 marked its peak on Wednesday. Major corporations, including Toyota or Panasonic, assured their workers apparent increase of wages this year. Because their business had been followed by policies of the administration led by Prime Minister, Shinzo Abe, it is likely that they will cut wages as the governmental support ceases. This is something called government-made wage growth.

The spring labor offensive is the negotiation between employers and workers over two categories, raising basic wages and providing with temporary payment. Most corporations had been rejecting basic wage hike to maintain competitiveness of their business, while appeasing their complaining workers with temporary payments. It is the first time since 2008 for them to be positive in base-up.

With great surplus in exports followed by navigated cheap yen, carmakers showed a significant reward to their workers. Nissan agreed with its workers union on raising both basic wages and temporary payments as much as the union demanded. Toyota, Honda and Mitsubishi offered increase of basic wages more than one half of unions’ demands. Electric supply makers, such as Hitachi, Panasonic or Toshiba, commonly showed monthly ¥2,000 increase of base-up, just a half level of unions’ demand. It is fair to say that those efforts by employers were positive reaction to workers.

It is, however, a positive sign only from big corporations. Middle class and small companies have not shown clear attitude for wage increase. Looking into bottom of Japanese economy, the wages of non-permanent employees would not be guaranteed to be included in the trend of wage hike. While some major corporations have announced more salaries to the non-permanents, most companies have no clear vision of raising wages of them.

The greatest driving force of these wage hikes is political pressure from the administration. The Ministers of Abe Cabinet recognizes that corporations must reward to the stimulus policies of the government with raising salaries. “To the companies negative in wage increase, Ministry of Economy, Trade and Industry will take some measures,” told Minister of Economic Revitalization, Akira Amari. The administration is blindly running to their political goal of creating positive circulation in economy with stronger consumption.

This top-down style in wage policy for each company may distort free economy. Amari’s indication of penalty can cause unreasonably high salary that will pose difficulty on business. If the government controls every aspect of business activities, it will make no difference from socialist economies once seen in Soviet Union or China.