Biggest Raise Ever

Like the famed "bullet train" that rockets from Tokyo to Kyoto at 125 m.p.h., Japanese wage rates are rushing ahead at a speed unmatched anywhere else. In last month's shunto, or "spring offensive," Japanese unions won pay raises for 35 million workers averaging 31.4%--the biggest across-the-board increase on record for any industrialized society. The boosts will place many once lowly paid Japanese workers on a par with their European counterparts. The typical steel worker's pay (not including fringe benefits) rose from the 1973 level of $493 a month to $650. Auto workers' incomes spurted from $480 to $610, while cotton-mill employees, historically the nation's most poorly paid industrial workers, got their paychecks fattened by $120, to $470.

But last week, before the Japanese worker had much of a chance to either save his new-found wealth or spend it on the television sets and tape recorders that he makes, doubts spread as to whether anyone had really won any thing worthwhile. Prime Minister Kakuei Tanaka warned that the big pay raises could set off a vicious wage-price spiral that would boomerang against consumers and threaten Japan's competitiveness in world markets. The workers themselves, who had gone so far as to stage a two-day transportation strike to press their demands, concede gloomily that most of their gains have al ready been wiped out by Japan's virulent inflation. Living costs so far this year are running 21% ahead of 1973.

Says a young accountant for a large cement company: "The big pay raise doesn't put me any closer to my dream of owning my own home."

The wage increase comes on top of earlier blows to the economy from yen appreciation and soaring oil prices. Already, electric-power rates are scheduled to rise in August by 40%, and shipping costs by one-third. Even before the wage increase, sales of Japanese automobiles in the U.S. were running at only 60% of 1973's level, in part because prices have climbed 5% to 10% above those of comparable American makes. A Toyota official says that the wage boost will force prices even higher this fall. The Industrial Bank of Japan predicts that by next year it will be cheaper to produce such electronic products as television sets, radios and calculators in the U.S. than in Japan, a belief underscored by the recent decisions of Sony, Matsushita and Hitachi to start manufacturing in the U.S.

Just how badly the wage increase will hurt the export sales on which Japan is so dependent is still uncertain. Some economists believe that its chief impact will be to weed out inefficient, labor-intensive industries. The government reported last week that April's exports set a postwar record, rising a stunning 61.3% over the same month a year ago. The climb was led by efficient industries, such as steel and shipbuilding, that are benefiting from worldwide shortages. The latest wage increase follows one of 23.6% in 1973 and an average hike of 15% annually during the previous decade. Despite Japan's legendary productivity (up 20.1% in 1973), Finance Minister Takeo Fukuda claims that the economy can no longer withstand such boosts. He feels that government-imposed "flexible wage guidelines" may be necessary.

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