LABOUR-JAPAN: Lower Bonuses Signal Harder Times

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Dec 23 2002 (IPS) - Minoru Ueda, 37, says he is having a “very low key” yuletide season, thanks to his record-low bonus this winter. But the salaried worker, who has survived a severe downsizing scheme in his electrical company, is not complaining.

“The family has had to cut our vacation short this year. But at least I still have my job,” he says.

Ueda received around 600,000 yen (5,800 U.S. dollars) this winter, or 40 percent less than last year. Needless to say, the cut is painful for the four-member family that has traditionally relied on Ueda’s bonus to pay for their vacation and other plans.

“Japan’s winter bonuses represent a much hailed labour tradition in Japan,” says Miki Tanikawa, a business analyst and writer. “But this year’s exceptionally low bonuses prove that that is a bygone era.

The Institute of Labour Administration, a Tokyo-based think tank, reported earlier this month that winter bonuses declined by 43,000 yen or 6.1 percent from last year, surpassing the previous year’s decline of 5.6 percent.

Average bonuses this winter stand at 660,000.yen (6,200 dollars). Bonuses in the eighties were traditionally five to six months of a worker’s pay, but this has been falling through the bad economic times of the nineties. Today, bonuses are down to one to two months’ salary, depending on companies’ performance.

The institute’s study also revealed that bonuses are based on pay packages agreed by labour and management and reflects weak stock prices and business uncertainties.

The decline in bonuses stands out in Japan’s core industries such as steel and electrical appliances.

Topping the list with the biggest declines in bonuses is the construction industry, where winter bonuses will drop 16.6 percent from the previous year to 519,000 yen (4,720 dollars), followed by the steel manufacturers and electrical appliances.

Only four business sectors — ship building, automobiles, pharmaceuticals and private railways – are paying higher winter bonuses this year.

Central government employees below management level also saw their bonuses slump to an average of 82,000 yen (745 dollars) per worker.

Looking to the future, Tanikawa says the decline in bonuses will not be reversed given the long economic slowdown and low prospects for a turnaround. “Japanese bonuses have been decreasing steadily over the years as a result of the sluggish economy. Naturally, employment patterns in Japan are facing drastic changes,” he explains.

Experts say the slowdown in the modest growth that the Japanese economy has been seeing – from 0.9 percent in the April to June quarter to 0.8 percent in July to September – is expected to continue.

The Japanese economy has been trying to pull out of recession, at least in terms of figures, and the growth projections for fiscal year 2002 is estimated at 1 percent.

But though this shows positive growth, private economists at the Dai-ichi Life Institute warn that the recovery may be weak because domestic demand remains lacklustre because the deterioration of the labour market undermines consumer confidence.

Indeed, companies are not only cutting bonuses but have even begun to chip away at monthly wages – a practice almost unthinkable in a country where labour stability was key to its post-war economic miracle.

“Standardised wages boosted worker loyalty and the bonus provided them with incentives. But with the poor economy Japanese workers are no longer secure,” says Eiko Aoyama, an analyst at Rengo, Japan’s largest trade union.

Indeed, the situation was so bad that Japanese unions opted for job over pay during Shunto, the traditional labour negotiations with management over wages in March. “With the unemployment hovering at a record 5.4 percent, the onus was not on pay hikes but on job security,” explains Aoyama.

Even at Toyota Motor Corp, where business has been brisk this year, its labour union suggested in October that it would not demand wage increases. Strong performances had boosted bonuses modestly among carmakers this year.

In a show of solidarity with workers, Upper House lawmakers passed a law in March cutting their pay by 10 percent in fiscal 2002 to help the government save money.

Declining bonuses and changing wage scales will have ripple effects, experts say. They add to rising economic insecurity that make many Japanese spend less — not the best thing to jumpstart the economy with.

Surveys by Dentsu Inc., Japan’s leading advertising company, indicate that most Japanese save more than half their bonuses or use it to pay back their mortgage or children’s education.

According to the Bank of Japan, national savings now reach 140 trillion yen (12 billion dollars), up 20 trillion yen from a decade ago. This also reflects the trend of people saving more and holding on to their money as job insecurity rises.

This is not good news for worried retailers who want to see spending grow.

“The longer yearend holiday was always a big business opportunity for us. Not any more,” rues Keiko Abe, a travel agent who reports that while airlines remain fully booked, the Japanese have been taking shorter and cheaper vacations this winter.

Department stores, which also cut winter bonuses for its employees, are reporting a wide range of new consumer initiatives in order to not lose business.

But Tanikawa says the low consumption spending is in fact likely to increase next year, as the Japanese brace up for a clean-up of bad loans under the government’s financial reforms.

There are currently 3.65 million jobless people in Japan and the government estimates the disposal of 15 trillion yen in bad loans will force job cuts that would lead to 650,000 employees losing their jobs and more than 200,000 people not finding new jobs.

“Because of lots of worrisome factors such as falling stocks and the U.S. economic slowdown, we have little hope for a full scale recovery of personal spending,” predicts Hiroshi Nojima, president of electrical appliance retailer, Nojima Corp.

LABOUR-JAPAN: Lower Bonuses Signal Harder Times

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Dec 22 2002 (IPS) - Minoru Ueda, 37, says he is having a "very low key" yuletide season, thanks to his record-low bonus this winter. But the salaried worker, who has survived a severe downsizing scheme in his electrical company, is not complaining.
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