Labor and management issues in Japan

January 19, 2024［No.118-2023］
February 9, 2024［No.119-2023］
February 19, 2024［No.120-2023］
March 4, 2024［No.121-2023］

Akira Oikawa
General Manager, Labour Department,
Fureai Group, Medical Corporation

 

 

1. Basics of labor-management relations in Japan

Since graduating from university in 1977 and joining the Nippon Steel Corporation, I have had many experiences in work related to human resources and labor-management relations with six companies (Nippon Steel Corporation, Tetra Pak Japan, Chiyoda Integre, Ricoh, RK Consulting, Fureai Group), one government ministry (Ministry of Labour), and one employer's association (the Japan Federation of Employers' Associations). I was asked to talk about the current state of labor-management relations in Japan, and I would like to provide some insight based on my work at those companies, that ministry, and that organization.

To discuss this topic, first let me give you a brief description of current labor-management relations in Japan from general data on Japan. As of June 30, 2022, there were 9,992,373 labor union members in Japan. The unionization rate with respect to the total number of people employed in Japan, which is about 60.48 million people, is 16.5% (2022 Basic Survey on Labour Unions, Ministry of Health, Labour and Welfare). This means that only one in six workers in Japan are unionized. The rate was 45.3% in 1947, the year the survey was started, and peaked at 55.8% in 1949, but it has been steadily dropped in the roughly 70 years since then. Looking at other countries, the rate is highest in Nordic countries, at around 50 to 60%, averages 27.53% in Europe, and averages 24.38% in OECD countries, all of which are higher than the rate in Japan. The United States, however, is even lower, at 10.10% (2018, OECD data).

So, what structural changes have occurred in labor-management relations in Japan with this long-term decline in unionization rate and lower unionization rate compared to the rest of the world? Labor-management relations exist even without a labor union, and I would like to describe that structure and situation.

 

2. Four patterns of labor-management relations in Japan

Figure 1 divides Japanese labor-management relations into four patterns of A. has both a union and a union shop agreement, B. has a union but no union shop agreement, C. has no union, but has an employees' association joined by all workers, and D. has no union, but has an employees' association with optional participation or has no employees' association. With these four patterns, we can discuss an overall view of labor-management relations in Japan. I will now explain the characteristics of these patterns.

 

3. Pattern A labor-management relations (labor-management relations with a union and a union shop agreement)

Pattern A is most established in large companies (especially in the manufacturing industry) in labor-management relations in Japan. Union shop agreements state that all employees must be a member of the union. This is the type of labor-management relations that forms that foundation for labor-management relations rooted in major companies in Japan.

Union shop clauses in Japan are said to date back to the 1950s, after WWII. Seen as an antagonistic structure of labor-management relations in which an agreement that allows all new employees to join the union unconditionally at hire reinforces the union's position and weakens the company, this is a difficult concept to accept. Needless to say, at the very least, it significantly contributed to the growth of Japanese companies after WWII. At the Nippon Steel Corporation where I began working after university, all employees joined the union at the same time they joined the company. Anyone promoted to a managerial position then left the union upon promotion. The union shop system was imported from Western countries, but may be a difficult concept for people to accept in those and other countries. When I was assigned by Nippon Steel to work at the Japan Federation of Employers' Associations (now called the Japan Business Federation) for four years, I would explain the characteristics of labor-management relations in Japan to people who would occasionally come from abroad to investigate labor-management relations in Japan. I was surprised when I talked about union shop to someone from France and they said that union shop systems are a violation of the French constitution.

Union shop systems usually combine a clause that all people being employed must join the union without exception when joining the company and a checkoff agreement (union dues are automatically deducted from wages). What this system means is that unions get union members with almost no effort on their part. People often think that this system primarily benefits the union and offers no benefit to management, but I believe that this is merely a one-sided view.

While I have heard that the union shop concept was originally imported from Western countries, I would guess that there was some exceptional manager in the 1950s in postwar Japan who thought that the concept would contribute greatly to the growth of Japanese companies if it worked well. In other words, the union shop idea allows only one union per company and prohibit divisions within the union (*1 Example of union shop agreement—Bargaining agreement for Nippon Steel). In other words, companies only have to negotiate with a single union and need not prepare themselves to bargain with multiple unions. On the surface, this may look like a system that only benefits the union. However, there was some manager who thought that the system could offer considerable benefit to management as well and greatly advance company growth if it worked well. In other words, they thought that developing a union that is cooperative with management would facilitate the development of labor-management relations that aid management as the only bargaining organization. This may have been one major factor leading to the tremendous growth of Japanese companies after WWII. When I asked about this to seniors in the union of the steel industry where I made my start, they said, "you are not entirely wrong."

The ratio of unions that use a union shop system was about 56% of all unions according to slightly older data from 2015. The ratio of unions with a checkoff agreement is roughly the same, at about 57% (Survey on Status of Labour Union Activities in 2015, Ministry of Health, Labour and Welfare). The ratio of companies using a union shop system is 61.7% for companies with 5,000 or more employees and 68.2% for companies with 1,000 to 4,999 employees, which are above the average. This suggests that the system is more established in large companies overall. At large companies, finding and training union leaders who are cooperative with growth of the company is one key job of the labor division. With company growth as the base, strikes and other types of labor disputes are rare, and this element should not be ignored (with respect to the 9.99 million or so union members, only about 53,000 (0.53%) have participated in any dispute, not limited to strikes. Looking just at strikes, there were 66 events joined by 6,466 members (0.06%). ――― Figure 2. 2022 Basic Survey on Labour Unions, Ministry of Health, Labour and Welfare). Companies in Pattern A using a union shop system are mostly major Japanese companies like my former employer (Nippon Steel), JFE Steel, Toyota, Nissan, Honda, Hitachi, and Panasonic. In Pattern A, some people claim that unions with a union shop system are company-controlled unions, but I can say for a fact that this is not true. I will leave that for another time.

 

4. Pattern B (labor-management relations with a union and no union shop agreement)

Pattern B is the domain of companies and corporations that have unions but have not signed a union shop agreement. It is used by about 44% of unions. In contrast to union shop, these unions mainly use a system called open shop in which employees are not forced to join the union but may opt to join or form one. Counting backwards from the ratio of unions using union shop, this accounts for about 44% of unions in Japan. In this system, only employees who want to become a member join, which may perhaps be considered the ideal scenario for labor-management relations, in a sense. Putting it differently, however, workers who are conscious of issues in labor-management relations may become the core of the organization, resulting in radicalization of the labor movement. Notable companies in this field are JR companies, Japan Airlines (JAL), All Nippon Airway (ANA), companies in the public sector that employ civil servants, and foreign-affiliated Japanese corporations. Today, labor disputes (like strikes) are becoming rarer among these companies. About 20 years ago, however, they had more labor disputes than union shop companies. At present, there are far more labor disputes (like strikes) among unions in the National Confederation of Trade Unions that likely have a higher ratio of open shop systems than among unions in the Japanese Trade Union Confederation that likely have a higher ratio of union shop systems (Figure 2. 2022 Basic Survey on Labour Unions, Ministry of Health, Labour and Welfare). I worked at Tetra Pak Japan, a foreign affiliate, for three and a half years. It had three unions and had to bargain with all three. In particular, unions working with Tetra Pak Japan that belonged to the JMIU (a communist workers union) would sometimes hold a strike. The union for the Ministry of Labour where I was assigned by Nippon Steel also fell into Pattern B.

Before discussing Pattern C and D that have no union, I would like to touch briefly on one important factor. A major difference between unions (A, B) and employees' associations (C, D) is the problem of the amount of dues collected. Payment of union dues is compulsory in unions (A, B). The average amount for union dues of unions under the Japanese Trade Union Confederation umbrella is 5,066 yen a month. This is equal to 1.61% the average monthly salary that is 314,027 yen (Japanese Trade Union Confederation survey conducted in October 2021). Making payment of union dues compulsory has the purpose of more than just funds for activities—it is used to compensate workers for salaries lost during a strike. Supposing strikes are very rare, having this kind of financial resource sustains the basic function of a union that could go on strike at any time. Employees' associations, on the other hand, are not based on a premise of striking, and so the membership fee is usually nothing or no more than around 1,000 yen a month.

 

5. Pattern C (labor-management relations with no union but with an employees' association joined by all workers) and Pattern D (labor-management relations with no union but with an employee's association with optional participation or no employee's association)

Pattern C and D account for 83.5% of employees (about 50.48 million people), in a sense forming the core of employees. The fundamental difference from Pattern A and B is the lack of a right to strike. There are not really any specific surveys or explanations on C and D, but they are the largest domain, comprising 83.5% of employees, and can be considered the core domain of labor-management relations, in a sense.

C and D do not have the right to strike. However, if several employees were to create a union charter or basic articles related to activity finances and receive permission from the local labor office, they could have it approved as a union. Pattern C would be an employees' association joined by all company employees. Although not a union, the company prevents a union from forming by forming its own employees' association. This is the primary intention of C. As companies creating this system (even employees' associations), Ricoh where I worked for two years and Chiyoda Integre, an electronic parts manufacturer where I worked as a director for 11 years, are companies that belong to C. Another well-known example that falls into category C is Kao. Both Ricoh and Chiyoda Integre presented spring wages and employment terms to the employees' association, requesting its approval despite it lacking the right to strike.

The reasons why management encourages C are (1) they do not want employees to form a union with the right to strike, (2) they want employees to have a general feeling of camaraderie, and (3) the increased management efficiency of having an association with the role of assembling employees as a centralized partner for addressing labor terms. Based on this mindset, they support C. Even C does not hinder or prevent employees from forming a union (which would be an unfair labor practice that is against the Labor Union Act). For this reason, personnel and labor departments are very attentive to employees' associations. In the case of C, many companies also have managerial staff as members or all staff (sometimes even the company president) as members. They likely want to make the association feel as little like a union as possible and have all members of the company join in this manner.

D is the scope in which an employees' association is created for only those wishing to join or there is no employees' association at all. In the former case, even though it is an employees' association, the company does not generally negotiate labor terms with it. It is often more of a social group. A considerable number of companies do not even have an employees' association. In both C and D, workers who are dissatisfied with the company and have a complaint can call upon like-minded employees to create a union themselves. Alternatively, they can join a union that accepts individual members and take the course of appealing for collective bargaining. As the first option is a lot of work, many individual workers choose the second option. I worked for three and a half years at Fureai Group, a group of medical and welfare corporations that belong to D. During that time, I was in charge of labor-management relations, and I managed collective bargaining with the Tokyo Union, Tokyo Managers Union, Rengo Kanagawa Union, Kanagawa City Union, and Kanagawa chapter of the Japan Federation of Medical Worker's Unions for employees who joined those unions as individual members.

 

6. Summary

Labor-management relations in Japan are divided into four groups depending on whether there is a union and whether all employees participate. This article summarizes the current state and characteristics. I have belonged to each of these four patterns at some point, and I wanted to explain the true nature of labor-management relations in Japan by discussing the characteristics of each. I do not know how well I accomplished that, but I think that I have at least shown the perspective of someone who actually worked in contemporary labor-management relations in Japan. In particular, I have presented the domain of unionless patterns that have not been widely discussed, and I hope that you will remember that this domain comprises an important part of labor-management relations.