Conference on Organized labour
Responses to the Conference Paper
Masami Nomura
Graduate School of Economics, JapanTohok University, Sendai, Japan
22 July 1998
I received your message for preparing a network on labor unions. Certainly, you raise important questions on the future of labor unions. I would like to take part in this network. For your interim report to be published in October 1998, I attach a statement which is a part of my book published in the last year.
Unions - creative policy, ineffective implementation
Traditionally Japanese "industrial unions" have been eager to implement industrial policies which should benefit both firms and employees. However, until recently society ignored the industrial policies of "industrial unions". As expected, when the economy and industry are working well, few show interest in the union's industrial policies. When the first oil shock resulted in a severe recession in 1973/74, unions too lost their cool judgement and could not suggest alternative industrial policies. In the post-bubble recession, however, industrial policies of the two most influential "industrial unions" drew the attention of mass media with their innovative ideas. These two unions are the Confederation of Japan Automobile Workers' Unions (JAW) and the Japanese Federation of Electrical Machine Workers' Unions (Denki Rengo).
JAW
The industrial policy of the JAW became a hot topic in the early 1990s. The JAW has insisted that it has been a partner of the automobile companies since its foundation in 1972. But in 1992, the JAW suddenly published a very critical view about the Japanese automobile industry. The report, titled "Japanese automobile industry in the future," asserts that the Japanese automobile industry is damaged by the "triple sufferings": labor shortage, low profitability and criticism both from abroad and from within Japan. Workers, especially young production workers, do not like hard work and try to find jobs in other industries. Sales are growing, but profitability is declining. Foreign countries are demanding more restrictions on exports from Japan. Many Japanese believe that the trade disputes are centered around automobiles; thus, a fundamental reorganization of the industry is needed. This was the analysis made by the JAW.
The JAW proposed a new concept for the automobile industry: "coexistence". The Japanese automobile industry should change toward coexistence with the world, consumers, and employees. The surplus in exports should be corrected by "coexisting" with the world. The car industry should provide accurate information on waiting periods for delivery and reduce sales negotiation efforts in order to "coexist" with consumers. The workplace and working conditions should be humanized in order to secure "coexist" with employees.
This radical industrial policy was, however, short-lived. This industrial policy was formulated during the bubble boom and a period of serious labor shortages. The burst of the bubble turned the labor market from serious labor shortage to serious labor redundancy. In the bubble boom, JAW thought that the Japanese automobile industry would decline with low profitability and labor shortages. Now the JAW faces overcapacity and overmanning which might threaten the future existence of the automobile industry. How to revive the industry and how to avoid unemployment has become the hottest issues for JAW.
JAW enlisted Mitsubishi Research Institute to simulate future employment trends of the Japanese automobile industry. The ups and downs of domestic production largely depend on exports, which are strongly affected by foreign exchange rates.
Table2 Simulation by Mitsubishi Research Institute
1994 2000
(1 US$=85 Yen) (1 US$=100 Yen)
domestic sales import 300,000 units 500,000 450,000
domestic 6,200,000 6,000,000 6,250,000
export 4500,000 3,000,000 3,800,000
production 10,550,000 9,000,000 10,000,000
employees 850,000 men 690,000 825,000
difference from 1994 -160,000 -25,000
(Source: JAW, "Policy of JAW on workforce redundancy", 1995, 1.)
The most important policy is to keep foreign exchange rates stable. But this is far beyond influence of the JAW. JAW is examining if the following measures will stabilize employment: (1) work-sharing by reducing working hours. (2) shukko and ohen (short-term transfer) within the automobile industry and with other companies. (3) creation of new businesses by developing new technology. (4) creation of high value-added products. (5) creation of new business by deregulation. (6) increase of domestic demand by reforming tax system related to automobiles. (7) natural attrition with unfilled vacancies caused by retirement of employees who reach the compulsory retirement age. JAW is moving quickly to formulate concrete policies to implement these ideas.
Denki Rengo
Denki Rengo, equally influential in the labor movement as JAW, is discussing the effects of rapidly increasing production overseas. The electronics and electric industry faces the hollowing-out problem most seriously. The unemployment problem is what Denki Rengo faces. Denki Rengo proposes the following measures: (1) appropriate foreign exchange rate. (2) vertical and horizontal division of labor between domestic and overseas production. High value-added production should remain in Japan. (3) collection of fair profits (dividends, royalties) from overseas plants. (4) avoiding more excessive competition. Securing appropriate profits. Early start in the multi-media business.
Denki Rengo acknowledges that a restructuring of the industry is unavoidable. It will be accompanied by reforms of the employment system which will result in flexible employment. Firms will transfer their employees within a company more flexibly and utilize shukko more often. Flexible employment will inevitably change the nenko-based wage system which is founded under the precondition of long-term employment.
In the future, according to Denki Rengo, there will be several categories of employment even among regular employees in any single company. A group of employees will work during scheduled working hours as before. Another group of employees will not be bound to scheduled working hours. Midcareer entrants will increase. With such a variety of employees, the pay system cannot remain the same. Annual salary, ability-oriented-pay and other pay systems will coexist in one company. Unions will have to accept plural pay systems within one company. Nenko-based pay will be reformed to resemble performance-based or ability-based pay. Denki Rengo recommends that enterprise unions negotiate with management on three points. First, minimum standard pay for living necessities should be negotiated. Second, ability-based pay or performance-based pay should be founded on a fair personnel assessment system. For this purpose, the management should give sufficient training to evaluators. Assessment criteria should be objective and should be explained to each employee. Third, with plural wage systems coexisting in one company, employees should be given the choice under which pay system they prefer to work. (Denki Rengo, "The fifth industrial policy of Denki Rengo, July 1995). Denki Rengo's cry for a personnel assessment system indicates that present assessment criteria are not objective, are not explained to employees, nor are the results given to employees.
Difficult policy-implementation
As seen in the industrial policies of the JAW and Denki Rengo, "industrial unions" have clear goals. The weakness of the union movement is not in policy-making but in policy-implementing.
"Industrial unions" in Japan are not industrial unions in the sense of Europe or America. Japanese "industrial unions" are federations of independent enterprise unions. Enterprise unions have full autonomy. They can elect their union officers, determine union fees, and negotiate with management. "Industrial unions" have neither the right to negotiate with companies nor the power to intervene in the election of union officers of enterprise unions. "Industrial unions" can only recommend their industrial policies to enterprise unions. This system generates a huge gap between policy-making and policy-implementation.
For example, when an "industrial union" decides on a target for working hour reduction, each enterprise union negotiates with its management. The management will argue the following, "we cannot reduce working hours simply because it will deteriorate our competitiveness on the market. You know, we have to survive. What would be the result if only our company reduces working hours and other companies do not? Can you guarantee that other companies will also reduce working hours?". It is difficult for enterprise unions to answer these questions, because no enterprise union knows if the other enterprise unions are intent on realizing the same goals or if they are negotiating only as a gesture.
This is not an imaginary story. In the early 1980s, the Nissan Union succeeded in reducing working hours of workers at Nissan dealers, while other enterprise unions did not. Nissan dealers had to close their shops earlier than the other dealers. A top manager of Nissan told us, "Do you think this is reasonable? It has contributed to our deteriorating market share. We will never accept such a stupid demand from the union again." (Interview in July 1987)
In the extreme case, when an enterprise union strikes, the enterprise union of the rival company supports it by lending money or organizing campaigns for the strike. Nominally, it is a solidarity action between enterprise unions. However, it might be motivated by a wish to defeat the rival company hit by the strike. It is said that such cases happened in the early 1950s and resulted in the mutual distrust of enterprise unions, though it is difficult to present evidence on this matter. In any case, there is a strong tendency toward mutual trust between an enterprise union and its management on the one hand, and mutual distrust between enterprise unions on the other hand.
It is often said that Japanese enterprise unions have a say on management policy through collective negotiations or joint consultations. Recently, Rengo asked officers of enterprise unions if they negotiate or consult with management on workforce reduction. Astonishingly, only 38% of enterprise unions in the manufacturing industry negotiated or consulted on workforce reduction schemes in 1994 (Rengo 1995).
An opinion survey conducted by Denki Rengo in September 1994 confirms this image. Union members in big electronics and electric companies with over 10,000 employees evaluate the activities of enterprise unions as a whole negatively. Only 1.2% answered that they were "very satisfied with union activities", 31.3% "satisfied to some extent", while 4.4% answered "totally unsatisfied" and 15.9% "rather unsatisfied". 46.6% answered "don't know". Notably, union members have a strong mistrust of union activities on employment problems. Asked if their union defends union members in cases of workforce reduction, only 29.4% answered "yes" while 53.6% answered "no". Also asked if the union can be relied upon to protect union members in cases of unfavorable transfer to another workplace, or shukko, 27.4% answered "yes" and 55.8% "no". These are the opinions of union members when employment problems are most serious. (Denki Rengo, "Chosa Jiho", June 1995, 135, 143.)
Nikkeiren wants to keep the enterprise union as is, though it proposes to reform the pay system and employment practices. "Enterprise unions have contributed to the development of firms and stable employment by reacting flexibly to job reorganization caused by technological changes through in-company communication. In the future, fundamental functions of enterprise unions should be maintained for the survival of firms and stable employment in the changing external environments." (Nikkeiren 1995, 58.)
Enterprise unions are faced with low trust from union members and high trust from employers' associations. In severe recessions, enterprise unions have alternatives: looking at rapidly changing management practices passively or implementing the industrial policies of "industrial unions". If they remain passive and do not actively support industrial policies, they will have no influence over this process, where fundamental aspects of Japanese management and employment system are redefined. If on the other hand they try to implement industrial policies, they will face structural difficulties in setting up solidarity between them. Initiatives of "industrial unions" need to be strengthened. Through joint consultations between the "industrial union" and its counterpart association, rather than through negotiations at the firm level, industrial policies will be implemented.
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