Slowdown of world economy casting shadow

The uncertain prospects of the world economy are casting a shadow over this year’s shunto spring wage negotiations. Pay levels must be raised steadily to shore up the economy.

In this year’s shunto talks, major businesses in the electrical appliance, automobile and other industries offered wage increases across the board. It is notable that the margins of the pay hikes are smaller than those agreed upon the previous year.

As for pay-scale increases – which raise the level of base pay – an agreement has been reached on a monthly hike of 1,000 yen, which is 500 yen lower than that recorded in the previous year, at leading electronics makers including Hitachi, Ltd. and Panasonic Corp.

Given the slowdown of the Chinese economy and other factors, firms have one after another revised downward their earnings forecasts for the business term ending in March. This is because their management was concerned about deterioration in their earnings environment.

A symbolic move in this regard has been made by Toyota Motor Corp., which sets the tone for shunto negotiations.

Its labor union demanded a monthly pay raise of 12,000 yen, which included pay-scale and regular pay increases. As this was significantly different from the pay hike planned by the management side, negotiations continued until the day set for the collective announcement of pay hikes by carmakers for the business year starting in April. The agreed pay increase of 10,700 yen is 1,000 yen lower than in the previous year.

The government-driven labor offensive, in which the government calls for pay raises, had continued since 2014. As a result, monthly pay raises of more than 2 percent, including pay-scale and regular pay hikes, have been realized. This year, however, the government did not mention a concrete pay increase target, so the pressure on firms to raise wages has undeniably weakened.

Nevertheless, corporate profit levels as a whole are high in general. Internal reserves amount to about 450 trillion yen.

It is understandable that the management side feels an increasing sense of urgency. But they are called on to move forward with passing profits on to employees as much as they can, without shrinking back excessively.

Continued pay raises are expected to expand consumption and thus boost economic growth rates, thereby also benefiting businesses.

It is worth noting that major electrical manufacturers are showing moves to reexamine unified negotiations on across-the-board pay hikes. These moves have emerged because their business operations have diversified and there are big differences in their business achievements.

A unified negotiations formula is a reassuring system for labor unions of companies with poor business results.