Japan Wage Talks: Ideas Later: Updated May 16, 2024.

 

Overhaul Shunto Wage Talks to Overcome Japan’s ‘lost 30 Years’

Article Source:  

https://japannews.yomiuri.co.jp/editorial/political-pulse/20240217-169261/?fbclid=IwAR0aJXjbjN7FcL0v-JwVdaQ6kfn1yltax1S6cKvKO0iD9mkNGIW-K10tiSw

Ideas:

For a long time, maybe before 1990, Japanese companies considered employees and important stakeholders in the company, and most likely wage negotiations were very cordial and not intense like in western companies that have labor unions.

But after 1990 as many Japanese companies starting using western accounting methods and started to think of employees as just expendable commodities and started to favor shareholders more favorable the environment might have changed in many Japanese companies.

Most likely its not reality to go back to the idea of "life-time" employment but employees need to be considered again, as much as possible, as key stakeholders in a company in Japan.

Also, the late Peter Drucker, the management consultant who was liked by Japanese companies likened the idea, again that Japanese companies treated their employees as stakeholders and not just commodities like western companies do.

But again, 1973, was a long time ago and the world has changed a lot. And maybe at that time the Japanese economy and Japanese companies needed life-time employment, in-house unions but maybe those days have passed and, unfortunately have now focus on shareholders, the bottom line, and not so much on the welfare of employees.

It seemed logical that Japanese companies with more market power created the base for wage increases and other companies, including small and midsize companies followed along the same lines.

Lifetime employment has both it positives and negatives, For one, maybe companies can focus on developing employees but at the same time, it might be a seen as too rigid for some who want to move through the company more quickly instead of waiting for 20 or 30 years to move into management.

But, again, these day, maybe many young employees are impatient and don't want to wait 20 or 30 years to move into a management position and are maybe are bored waiting a long time to contribute to that gets them into management.

The Toyota situation is an unfortunate situation where companies don't do things on their own and instead maybe blindly follow what the name-brand companies do. Other companies should have ignored that Toyota did and for the good of their employees should have increase wages as they felt was good for their company.

But unfortunately, Japan is a group-think culture and what the market power leader does others are going to follow.

Other companies might have been shocked, but most likely they didn't increase wages for fear of whatever related to what other companies might think or might do.

So Toyota became the bad-boy company and didn't put the importance of their employees first but most likely started to put shareholder value as the most important metric in the company.

And of course then other Japanese companies started to do the same thing, and now we what what we have today in Japan.

Unfortunately, Japanese companies follow the leader, the market leader, such as Toyota, and don't want to standout or be different. "The nail that sticks out" will get nailed down, as the saying goes in Japan.

Many Japanese companies, during the 90's and early  2000's were under a lot or pressure to modernize and transform to western business standards.

The one major difference was the importance of shareholder value as opposed to employee stakeholder value for many Japanese companies.

Intensified global competition especially from China might have been a major variable related to wages and cost cutting measure in Japanese companies back then.

Maybe Japanese companies should have focused more on quality and innovation, and not so much on cost cutting and wages.

But once cost cutting entered Japanese industry and the economy, it was hard to prevent or stop it once the market leaders started doing it in Japan.

The challenge or problem with correcting with Japan's high-cost structure, was/is you are dealing with change in all of Japanese society and the Japanese economy, which is exactly what we see happening today. 

The current wage increases are nothing more that trying the fix the cost cutting frenzy that happened in Japan in the early 2000's.

Perhaps, again, maybe Toyota has too much political and market power and other companies couldn't ignore what Toyota was doing.

And so it goes, on an on, when Toyota and other market leader companies decided to cut costs, which included suppressing wages, the entire Japanese economy went into its current stagnation and deflation situation, and even the current wage increases are not gong to overcome 20+years of wage suppression.

But to be fair, maybe there was a need to reduce wages, some, but not to the point of 20+ years of deflating the entire Japanese economy to the point that Japanese wages related to other OECD countries are now way down the rankings.

And again, instead of being able to think for themselves or do what was best for their company, many small and midsize companies just followed what the name-brand market leaders were doing.

And yes, again, unfortunately, even today, non-regular employees make up a lot of the employees and big companies, as, in the US, it became a trend that companies couldn't resist.

The Abe administration might have seen what was happening, but by that time, the situation had become fossilized, meaning cost cutting measures, irregular employees and wage suppression, along with deflation and stagnation had become the norm in the Japanese economy.

And yes, just like in other countries. labor unions were worried about jobs being moved to China, so of course they kept their mouths shut and didn't rock the boat during wage negotiations.

Keeping jobs secure became the number one priority and maybe for many its the same today, but the threat of Japanese companies moving operations overseas might still be continuous threat.

No doubt this is what has happened in the Japanese economy since the asset bubble crash of 1989, but in reality it was probably a long time situation, that didn't see any real changes such as improvements in quality, innovation, and improvements in Japanese companies and their work culture.

You can't blame the average Japanese worker or employee and they just want to survive from day to day, but management too, might not be so much to blame, as many investment companies came on the scene in Japan and started demanding cost cutting measures, that maybe many Japanese companies were reluctant to do, at the time.

But over time, shareholder/stockholders became more prominent in Japanese companies and the average employee had less of a say in the company too.

Yes, China might not be a major threat today, but China is still there and it is going through its own re-structuring situation now too.

Its going to take some time for Japanese companies to find their way again, and unfortunately, not rely so much on investment companies or even, if possible, stockholder/shareholders, who seem to have too much power these days.

Yes, Japanese culture and work culture is much different than the US or even the EU, and yes,  Japan doesn't need to do what Ford or GM did in the US recently has there might be better way for management and labor to cooperate while working on wage negotiations.

But again, Japanese companies need to listen to labor and not shareholders/stockholders and or the investment companies that only want cost cutting measures and or a specific profit target that might not include increased wages for employees.

The wage negotiations should include all groups such as full-time workers, part-time workers, irregular workers, and also large companies, midsize companies, and small companies together finding ways to increase wages for everyone.

Of course, as much as possible, each company should do what is best for it situation and not rely on the big name-brand companies to decide what wages should be.

It going to take several years of wage negotiations for the Japanese economy to get out of its deflation and stagnation situation that was started when Toyota, at the time, felt wage suppression was best for Japanese companies and the Japanese economy.

Have a nice day and be safe!