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Thursday, March 16, 2006

Wage increases reflect growing pay disparity


Staff writer

The pay raises at major carmakers and electronics firms announced Wednesday may be the first increases in five years but illustrate the fact that there are growing wage disparities between industries, companies and individuals.

Companies no longer offer uniform pay raises, and in the current global economy, competition is pushing some Japanese firms to lessen their wage increases, economists and labor experts say.

In the electronics sector, for example, Matsushita Electric Industrial Co. and Hitachi Ltd. each offered a 500 yen increase per month, while Fujitsu Ltd. proposed a 1,000 yen raise.

The wage structure has changed from lifetime employment with a seniority-based pay system to one based on performance. This means there is a range of salaries within each age group.

Hisashi Yamada, senior economist at Japan Research Institute, said even companies showing profits are becoming more careful about giving large pay raises because of intensifying competition in the global market.

For example, Yamada said, automakers may have been increasing their earnings and profits recently, but they have not been giving the pay increases the workers have been expecting.

"Many firms are increasing their overseas production, and when they think of their global competitiveness, they cannot afford to pay for big wage rises," Yamada said.

The economist also said Japan's changing industrial structure is affecting the outcome of the spring pay talks.

Major automakers used to get most of their auto parts from their affiliates in Japan, but that has changed in the past two decades.

"More firms are increasing their business with overseas companies instead of group companies in Japan," Yamada said.

"In the past, if a leading company in the industry was having good business, it would positively affect the rest in the industry. But not anymore."

Meanwhile, Japan's labor environment has changed, allowing greater wage disparities among employees.

Sumio Egami, director of research and information service at the Japan Institute for Labor Policy and Training, said performance-based pay, which has been introduced in many companies over the past five years, is creating wage gaps.

Egami also said the outcome of labor-management negotiations in major companies used to be the yardstick for other manufactures and industries in their annual spring negotiations, but not anymore.

"The management side no longer believes it should pay the same amount as other well-known companies, like Toyota," Egami said.



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