Labour Reform is Necessary for Growth
In June 2017 the International Monetary Fund identified labour reform in Japan as a major requirement for economic growth. It emphasised the need for equal pay for equal work and the closing of the pay gap between regular and non-regular workers.
Over the years the number of irregular workers in Japan has been growing. They now make up 37.8% of the Japanese workforce. Women make up 56.3%. Non-regular workers and women are generally paid up to forty percent less, and for no other reason than their work status. This growth in the employment of non-regular workers has meant the wages are increasing very slowly which is curbing consumer spending and slowing economic growth.
A Step Closer to Labour Reform
One year later, Japan may be moving a step closer to labor reform. The last week of June saw the controversial new labor law clear Parliament’s Upper House. This law will set a cap on the amount of overtime worked and ensure “equal pay for equal work” for regular and irregular workers. The legislation exempts professional workers from regulated hours.
wages are increasing very slowly which is curbing consumer spending and slowing economic growth.
At the beginning of the month, in a surprise move, the Supreme Court in Japan ruled that a trucking company that was paying non-regular workers considerably less than regular workers had no reasonable basis for doing so and ordered that the company pay 770,000 yen in back to workers.
Japanese Labour Law does not allow for unreasonable differences in wages, but it is poorly policed. While the Labour Inspection Office does police non-payment of overtime, it does not check pay disparities. The onus of proof in any claim of unreasonable pay discrimination by an employee against her employer is on the employee. In the absence of penalties, employers have not been keen to change.
Many companies force their employees to retire at sixty and then rehire them as non-regular workers to do the same jobs for less money. In a country where thirteen million people have passed the mandatory retirement age of sixty and are still working, the effect must be constrained consumer spending. Up to sixty percent of retirees are rehired, eighty percent of them in the same capacity but on a temporary basis for less pay.
This May Force Changes
The court finding is not expected to have a major impact on pay disparities, but it may force some incremental changes, and companies may have to start reviewing how reasonable their pay differences are.
Article 20 of the Contract Labour Law disallows the unreasonable pay differences for people doing the same work. Companies will have to base differences in pay on the type of work done and the level of responsibility.
With the most recent court finding employers could increasingly find themselves having to justify the employment of non-regular employees and the irrational lower wages paid to them. This decision may force organizations to think more carefully about automatically paying permanent employees more that non-regular employees with no consideration of the work done.