Focus of Japanese workers' spring struggle -- Part One: Wage cut attacks in full gear

The annual spring struggle this year is marked by many corporations proposing abolishing the annual wage increase system, or planning to stop applying the system to younger workers or offer smaller increases.

Last year, workers were angered by many corporations offering no base wage increases or a freeze on annual wage increases, plus elimination of various benefits. Most of these offers were made as a temporary measure in an "emergency" to tide over the allegedly worsening earnings.

This year, corporations are more blatant in seeking to abolish or review the annual wage increase system; their capitalist logic is aimed at a drastic and lasting adverse change of the wage system.

Corporate moves toward a new lower wage system

The system of annually increasing wages is the centerpiece of the wage system based on seniority, irrespective of the economy at the time. Historically, the seniority-based wage system was aimed at holding the wage level low with just a nominal annual wage increase, as the starting pay can hardly support a worker. Without a change in the number of employees in the same age brackets and in the total number of employees, the total personnel cost the company pays does not change, even after annual base wage increases.

To the workers, the system which combines a low wage and a guarantee for an annual base wage increase helps them work out life plans about when to marry, bear and educate children and how much they can afford to pay for housing loans. The large corporations that maintained the system of annual base wage increase even during economic recessions are now calling for the system to be abolished or the increase to be limited or reduced to zero. This means that capital's attack on workers has entered a new stage in which employers are determined never to raise wages and to reduce, as much as possible, the workers' wage level.

Large corporations have not responded to the globalization trend by developing revolutionary and creative technologies that newly industrializing countries can not introduce or boosting sales by marketing high-quality goods. They opted for the management strategy of enlarging profits more than their competitors by lowering the cost of production to the level of newly industrializing countries, the strategy mainly based on corporate restructuring and personnel dismissals.

This thinking is most succinctly expressed in the slogan "We need a structure which ensures profits even during recessions." For example, Mitsubishi Heavy Industry's interim plan for 2002 estimates a recovery of the current profit from minus 91 billion yen in 1999 (actual) to 130 billion yen in 2005 by cutting the work force from 39,400 to 33,000, even though the sales turnover is estimated to remain almost the same at 2.5 trillion yen. Now, large corporations have changed tack to lowering the wage level by ending the system of annual base wage increase as the major cost-cutting strategy to accompany personnel reduction. This illustrates the socially regressive mentality of Japan's large corporations.

Large corporations are planning to replace the seniority-based annual base wage increase system with a performance-based individualistic wage system. Under the performance-based wage system, the idea that a base wage for a worker has to be increased every year is lost. The saying "Work hard, and you will be rewarded" will no longer apply. The idea is that the firm cuts the total personnel cost and divides workers to vie among themselves for performance, the assessment of which is based on the subjective and arbitrary judgment of superiors in management, and imposes on them wage cuts coupled with tight work schedules and long working hours under the guise of workers' choice. Management monopolizes the right to make decisions on wages, and this situation threatens trade unions with their very existence.

Double choice for employers, restructuring and wage cuts

The wage cost index (1995=100) for 2001 has dropped to 95.8 due to the reduction of the total number of the employed, particularly due to dismissing middle aged workers, the group with comparatively high wages. With corporate restructuring, large corporations achieved a sharp recovery. Midterm reports of the nation's 1,630 share-listed companies for September 2002 showed a 41.1 percent increase in their combined current profit to 7.64 trillion yen. In a half-year estimate made in March 2003, the combined current profit will increase by 71.1 percent to 16.36 trillion yen (Nihon Keizai Shimbun). In the manufacturing industry alone, a 60.5 percent increase in September and a 102.8 percent increase in March was achieved. To crown it all off, large corporations are going to drastically undermine the wage system in a bid to cut wage costs.

What is worse, corporate restructuring is still under way. A survey by Nihon Keizai Shimbun of 300 large corporations showed that about 165,000 workers in 93 firms were "restructured" in the last three years. Sixty-nine firms have specific plans to "restructure" about 111,000 workers in the FY 2002 through 2005.

The internal reserves hoarded by large corporations are still at a high level. The internal reserves of over 5,000 firms (capitalized at 5 billion yen and over) continued to increase from 121 trillion yen in FY 1992 when the bubble economy burst to 173 trillion yen in FY 2002.

In FY 2001 the internal reserves slightly declined to 145 trillion yen because these firms had to pay the costs for "corporate restructuring," make up for losses in current profits, and write off bad debts. The drop has resulted in returning to the FY 1998 level, which is twice the amount of that 1988 when the bubble economy started.

This is a manifestation of capital's tyranny and greed, in which it pursues both corporate restructuring and undercuts the wage system by taking advantage of economic recession, with a view to setting up a new structure of intensified exploitation, suppression and accumulation.

Vicious circle of recession and deflation

This path, however, promises no future.

In workplaces where the number of workers were reduced as a result of corporate restructuring, tight work schedules with long hours and capital's chipping away of workers' wages in the form of unpaid overtime are prevalent. An urgent survey by the Health, Labor, and Welfare Ministry of 3,000 workshops has detected unpaid overtime in 20 percent of the workshops, with a shortfall in the payment of premiums for overtime. Workers' mental illness has become a social problem as the workers are inflicted not only with physical fatigue and illness but also by anxiety that they may be restructured. In an Asahi Shimbun survey of 100 major corporations, 43 firms (60 percent of the 75 respondents) answered that the number of workers on sick-leave due to mental illness increased in the last five years, and 30 firms (40 percent) said the numbers showed no change.

In workshops where a performance-based pay system has been introduced, discontent and contradictions have erupted to the extent of impeding workers' motivation to work and their team spirit. Workers state:"The score does not reflect ability fairly." "Everybody only minds their own work and never help others." "No one volunteers for work which does not produce immediate tangible effects." The rating system is unpopular among middle-level managers because they have to work extra to assess the performance of their subordinates and rating other people is stressful work and can too often harm human relations.

Actually, the new wage system has caused productivity and corporate vitality to decline, as seen in the increase in the number of inferior goods, product complaints, and work-related and other serious accidents at workshops.

A report by the economic social productivity headquarters, a Japanese version of Deming's Movement pursuing higher productivity, states that the annual wage increase system represents social trust in human ability and the dignity of humanity. Will corporations be able to maintain and strengthen international competitiveness and increase productivity by further destroying workers' health, their minds and their motivation to work? If the management has no business strategy other than personnel dismissals and wage cuts, their ability to operate business will be called to question.

Personal consumption is depressed as the people's anxiety about their livelihood increases under the combined influence of corporate restructuring, wage cuts, and the 4 trillion yen extra burden on the people under the Koizumi "structural reform" policy. Under corporate restructuring without a sound strategy, equipment investment is limited to investment for replacement with no signs of increasing upward. It is also clear that "structural reform" does not affect the wasteful large public works projects.

Nikkei Shimbun in its editorial on February 20 warned that the economy is at the start of a full-fledged downward trend. For corporations in these economic circumstances to continue personnel reduction and at the same time abolish or undercut the annual base wage increase system in order to set up a system of more intense exploitation and higher accumulation will only create the vicious circle of economic recession and deflation. It will drive both the Japanese economy and corporate management into a crisis.

In the distribution industry, they go so far as to say that the talk of the spring struggle leads to falls in sales. It is time for trade unions to fulfill their role in fighting back against the attack of abolishing the annual base wage increase system and cutting wages. (to be continued)