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Policy Proposals  Labor Policy Summary of the 2016 Report of the Committee on Management and Labor Policy Achieving a Virtuous Economic Cycle and Sustainable Growth for Companies in the Context of a Declining Population

January 19, 2016

Keidanren publishes an annual report by the Committee on Management and Labor Policy, setting out the employers' basic stance toward the spring labor negotiations and consultations, and our basic position on employment and labor issues.

The subtitle of the 2016 report is "achieving a virtuous economic cycle and sustainable growth for companies in the context of a declining population." This subtitle reflects Keidanren's strong determination to address the urgent issue of a virtuous economic cycle and bring about sustainable growth for companies as part of our response to the medium- to long-term problem of a declining population. The report consists of three chapters: Chapter One "Creating Innovation through a More Diverse Workforce and Reform of Working Patterns," Chapter Two "Policy Issues in Employment and Labor," and Chapter Three "Employers' Basic Stance toward the 2016 Spring Labor Negotiations and Consultations." What follows summarizes the chief points of Chapter Three, which represents the main part of the report.

Employers' Basic Stance toward the 2016 Spring Labor Negotiations and Consultations

The Business Environment for Japanese Companies

The Japanese economy is steadily recovering, and it is expected that many companies will continue to post positive results. At the same time, however, many companies have revised their forecasts downward, and considerable uncertainty remains concerning the impact on emerging economies of the recent increase in US interest rates and other factors. Small and medium-sized enterprises, which represent the driving force of regional economies, face a challenging business climate, and the increase in ordinary profits at these firms has been much slower than at large companies.

View on Rengo's "2016 Spring Offensive for a Better Life" Policy

The Japanese Trade Union Confederation (Rengo) demand for a basic pay-scale increase of "around 2%" is more flexible than last year's demand for "2% or more," and provides more leeway for company unions to compile their own demands based on conditions within their companies. When company unions issue demands to management, it is desirable that they should provide concrete proof to back up their arguments, reflecting the various factors to be considered when deciding wage levels. Also, Rengo is demanding at least ¥10,500 per month as a monthly wage raise in small and medium sized companies, citing the need to reduce the wage gap with large companies. This excessively high demand not only forms a barrier to constructive negotiations and consultations between labor and management; there is also a risk that it may have a detrimental effect on labor-management relations within individual companies.

Employers' Basic Stance

It is a fundamental principle that wages should be determined by management based on what a company can afford to pay, taking into account a variety of factors and in line with the need to keep total personnel costs within appropriate levels. One important factor that needs to be considered during this year's negotiations is the social requirement for companies to encourage the development of a virtuous economic cycle. Keeping in sight the path toward achieving the government's targets for a 3% increase in nominal GDP, it is crucial that companies do what they can to respond in a positive way commensurate with company profits. Specifically, we hope that companies whose profits are expanding will give positive and in-depth consideration to a wage increase in excess of last year's on an annual income basis, combined with capital investment, research and development spending, and expanded employment.

Pay rises need not be limited to regular wage increases or across-the-board pay-scale hikes. Companies should also consider weighted increases targeted at younger workers or employees with young children. Bonuses and other one-time increases, and adjustments to allowances and other benefits are other possibilities. Each company is different in regard to its business situation and the state of its results; we encourage companies to consider the full range of options available and choose the best approach for their own particular circumstances.

Labor Policy