The annual “shunto” spring labor offensive is coming into full swing while a large part of the nation remains under a state of emergency due to the novel coronavirus pandemic.

Certain industries are going through a rough patch. But financially strong companies should respond to demands from workers by keeping wages on an upward trend to help lay a foundation for mid- to long-term economic recovery.

The Japanese Trade Union Confederation (Rengo), the national umbrella organization of labor unions, has adopted three key demands: “sokoage” (raising the level); “sokozasae” (supporting the level); and “kakusa zesei” (rectifying disparities).

Rengo’s main goal for this year’s shunto negotiations is a 2-percent annual wage hike combined with a base-pay increase of around 2 percent.

Small and midsize labor unions have set targets for wage levels to narrow the gap with employees at large companies.

Rengo is seeking an agreement on an in-house minimum hourly wage of 1,100 yen ($10.50) or more, covering all types of workers, such as fixed-term workers, part-timers and contract workers. 

The Japan Business Federation (Keidanren) has made it clear that it is less willing than last year to respond to calls for wage hikes.

In a report published last month, the nation’s most influential business organization said it is unrealistic to expect companies to consider an industry-wide or across-the-board wage increase. It pointed out an increasingly mixed picture of corporate earnings due to the pandemic.

But Keidanren also said a base-pay increase is an option for companies whose earnings are increasing or remain stable at high levels.

In his New Year news conference, Keidanren Chairman Hiroaki Nakanishi said it is important to maintain “momentum” for wage growth.

He said it is a “serious problem” that Japan’s income levels are considerably lower than those of many other members of the Organization for Economic Cooperation and Development (OECD).

Japan’s gross domestic product is certain to sharply decline in the current fiscal year, which ends in March.

Many companies are reporting dismal performances in the restaurant, tourism, transportation and other industries hit hard by the pandemic. The unemployment rate has also picked up.

But declines in corporate earnings and bankruptcies have been limited overall due to unprecedented doses of fiscal and monetary policy support.

Overseas demand for Japanese exports is rebounding, while many companies are benefitting from demand related to longer hours spent at home and digitization of the economy.

Management should reward workers who have supported the nation’s economic activities in these difficult times. It should not roll back the trend of steady base-pay growth in recent years.

At Toyota Motor Corp., despite its robust earnings, the labor union has decided not to disclose whether it is demanding a base-pay increase. The move comes after the company rejected its union’s demand for a base-pay hike in last year’s shunto.

Experts say one factor behind this trend away from negotiating base pay hikes is that small and midsize firms, such as auto suppliers, are struggling to keep pace with wage increases at large companies such as Toyota.

But Rengo calls for “proper distribution of added value generated by an entire supply chain.” This should be achieved through wage hikes for workers at small and midsize businesses and nonregular employees.

Another source of concern is the argument in the Keidanren report that the pandemic has underscored afresh the importance for companies to secure certain levels of money on hand and internal cash reserves as a “provision for emergencies.”

If many Japanese companies overreact to the experiences in the past year by slashing their mid- and long-term investments and curbing wage hikes, the upshot would be the “fallacy of composition”--the mistaken notion that what is true for an individual is necessarily true for a group--leading to an economic contraction.

Companies need to avoid becoming extremely conservative to deal with the current situation by keeping in mind that massive policy support has been provided.

--The Asahi Shimbun, Feb. 12