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Japan Aims to Raise Wages for Contract Workers

Thirty-seven percent of the workforce in Japan are short-term contract workers, earning less pay and receiving fewer benefits than regular, full-time employees. But the gap between regular workers and contract workers could be about to close.
contract workers
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Katsunobu Kato, Japan’s Minister for Labor Market Reform, tells Reuters that the “government has placed a high priority on narrowing the gap in pay and benefits between regular and contract employees.”

A 1998 revision of the Labor Standards Law made it easier for Japanese firms to offer fixed contracts of a year or less, instead of the previous multi-year requirement. The effect was to create a two-tiered employment system. Workers on the traditional “lifetime employment” track received “indefinite” contracts and higher benefits and pay; temporary workers earned less. Some estimates place their pay at 60 percent that of regular, full-time workers.

During Japan’s Great Recession, companies hired short-term contractors to keep costs down and staffing up. Now, however, the government under Prime Minister Shinzo Abe hopes to address the income inequality that has arisen between the two tiers, and stimulate economic growth as well.

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“Wages are a big motivating factor. People want to feel they are being evaluated for their work and rewarded based on their work,” Kato told Reuters. “On a macroeconomic level, improving pay gives more people the chance to work and improve their pay, which feeds into higher consumption.”

New Guidelines: Equal Pay for Equal Work

Last week, the government released guidelines asking employers to pay contract workers and regular employees equally for their work, based on skills, achievements, and years of service. The guidelines also asked that employers offer contract workers bonuses and benefits that are currently available to regular employees.

The guidelines aren’t legally binding, but could factor into court rulings on employment cases in the future. The government also plans to submit bills revising the Labor Contract Law as early as next year. Presumably, if passed, those bills would make some provisions of the guidelines legal requirements.

Reactions from employers were predictably mixed.

“A representative of one major beef bowl (gyudon) restaurant chain that has over 100,000 part-time employees, commented, ‘If we were to pay bonuses to part-timers, the burden on the company would be too great,’” according to The Mainichi. “A supermarket with about 36,000 part-time workers, meanwhile, commented, ‘Judging how part-timers contribute to business performance is difficult and unrealistic.’”

On the other hand, one representative of a distributor told the paper, “There were many items which we have already implemented and it wasn’t as big a deal as we had feared.”

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Would you support guidelines like these in the U.S.? We want to hear from you. Tell us your thoughts in the comments or join the conversation on Twitter.

Jen Hubley Luckwaldt
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