Share this story
Close X
Switch to Desktop Site

Japanese industry rethinks its pay and security traditions

Tie salesman Masaaki Kono submitted his fiscal 1983 pay demand the other day. Negotiating one-on-one with his company president, the 26-year-old Kono asked for a 21.4 percent increase to just over $14,000 a year. ''I've been with the company almost five years now and I expect to increase my sales in 1983 by 17 percent,'' he argued.

''Company productivity is still very low, so I will have to consider your request very carefully,'' countered the president.

About these ads

This is the new look of Japanese wage negotiations for the austere 1980s. Until now, the staff of Hishiya, a leading Osaka tiemaker, worked under the tradition of granting wage increases according to years of service.

But Hishiya president Takeshi Okabe is experimenting with a one-year contract system under which each employee negotiates on his own salary, with major consideration given to efficiency and ability ratings.

''I want to motivate my staff to work better and to improve the management and business structure of the company to overcome the problem of low economic growth,'' he explained.

Some 200 employees have already submitted their pay claims for the year beginning next April, with increases ranging from a modest 8 percent up to an ambitious 46 percent.

Hishiya has established five rankings, ranging from ''special'' and AAA to DDD classes. It is prepared to offer the special class a 10 percent increase, with the rest getting from 6 to 9 percent.

To produce people willing to work hard, argues President Okabe, pay differentials have to be created between good and bad workers. The traditional pay system simply does not offer this kind of incentive.

Sony Corporation and Mobil Oil have already introduced an annual pay contract system for management level, but Hishiya is the first to try it for blue-collar workers.

About these ads

Taichi Sakaiya, author and former official of the Ministry of International Trade and Industry, commented: ''The traditional seniority-based pay system has become a heavy burden on industry. The paradise created by this and lifetime employment are nearing an end.''

Not surprisingly, unions aren't happy. It would be extremely difficult to establish a fair evaulation standard of each individual worker's pay which would not cause a lot of backbiting, commented an official of the largest labor federation, Sohyo.

More worrisome for the unions is that the individual pay system makes it hard to mobilize mass worker strength. In fact, it makes unions virtually obsolete.

Hishiya president Okabe admits there is a lot of trial and error involved now. ''But ultimately it should produce a system more closely geared to corporate needs to produce greater vitality, which is in the interests of all our employees,'' he said.

Other firms, meanwhile, are experimenting with ways of extending the flexibility that already exists in the Japanese employment system. Management is increasingly pushing the view that as workers have come to expect big wage increases during the good times, they cannot really object if pay packets get slimmer when things go poorly.

So far, however, moves in this direction have been limited mostly to management-level staff to avoid confrontations with the unions - especially when inflation and higher taxes have caused take-home pay to steadily decline in the past few years. The world's No. 1 steelmaker, Nippon Steel, for example, is studying the possibility of cutting wages for some 3,500 managers in February to tide over a severe business slump. It will be on a sliding scale with the most senior men assuming the heaviest burden.

Observers see this as part of the company's strategy to hold down wage increases for ordinary workers when the annual spring labor struggle gets under way. Nippon Steel has cut management wages 5 to 20 percent on three previous occasions in the past decade to cope with recession.

The main flexibility, however, is through the twice-yearly bonus (summer and at the new year) which, in good times, can amount to the equivalent of several months pay. Japanese wages in general are low by American standards, and many families would experience considerable hardship without the extra company handout. House mortgages take bonuses into account, for example, by stipulating two extra large repayments as soon as they have been issued.

When business is bad, therefore, cutting the bonus is the main means most companies have for cutting personnel costs. Layoffs are socially unacceptable, but even here companies have room for maneuver, as it's estimated that one-third of an average factory work force are contract workers, hired for the good times and dismissible when things turn bad.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.