(Bloomberg) -- One of Japan’s biggest union groups plans to seek wage increases of another 6% in next year’s pay negotiations, highlighting sustained pressure on employers to raise pay.
UA Zensen, a labor union with about 1.9 million members across sectors such as retail and restaurants, will seek a standard bump of 6% in overall wages in the talks culminating in March, maintaining its goal from this year, according to a draft plan released Wednesday.
The union has also set a slightly higher target of 7% for part-time workers to help narrow the wage gap with regular workers, the plan suggested. The group secured a 4.95% gain for regular workers and 5.75% increase for part-timer workers this year, according to their tally as of the end of June.
UA Zensen’s target follows an announcement last month by Rengo, Japan’s largest labor union federation, that it will continue to aim for at least a 5% pay rise in the next round of negotiations. The federation achieved the biggest increase in three decades this year.
The series of strong calls from workers suggests that companies will continue to face pressure to raise pay, increasing the likelihood that the nation will sustain the wage growth momentum of the past two years. That’s a key factor for the kind of virtuous economic cycle that the Bank of Japan has been pursuing as its mulls the timing for its next rate hike.
The central bank kept its benchmark rate unchanged in the policy meeting last week, but Governor Kazuo Ueda reiterated that the BOJ is on track to achieve its inflation target. That points to the possibility of another rate hike in the coming months, with economists broadly expecting the next increase to come in December or January.
Narrowing the wage rise gap between larger and smaller firms is becoming more key for sustainable wage growth, given that smaller companies employ the majority of Japan’s workers.
In Rengo’s final tally this year, firms with fewer than 300 employees agreed to a 3.16% raise in pay, compared to the 5.1% increase overall, highlighting how smaller firms have struggled more to bump pay. Rengo’s chair Tomoko Yoshino said at a recent press conference that smaller companies will be crucial to sustaining pay hike momentum.
Smaller firms, who are often subcontractors, tend to face more pressure on their profit margins. UA Zensen’s draft strategy states that it aims to stem the widening gap by promoting government guidelines for fair negotiations between subcontractors and contractors. Some 70% of UA Zensen members work for smaller companies with fewer than 300 union members.
A survey by the Japan Chamber of Commerce and Industry earlier this year showed that nearly 60% of small firms planning wage hikes did so despite no signs of improved performance. The BOJ’s latest quarterly report on the regional economy also indicated that many businesses, especially smaller firms, will likely continue to face a dilemma between declining profitability and the need to raise wages amid a chronic labor shortage.
Prime Minister Shigeru Ishiba is also planning on putting together support for smaller firms that need to catch up with larger counterparts. After being elected, the premier ordered the compilation of an economic package, which is likely to include support for smaller firms to invest in labor-saving technologies, but details are so far unclear.
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