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Since Nippon Steel agreed to buy US Steel for $14.9bn in mid-December, the deal has faced a bipartisan backlash in Washington against the sale of a US manufacturing icon to a foreign entity.
On Monday, a sliver of good news emerged as the United Steelworkers revealed that it had signed a non-disclosure agreement with the Japanese company, meaning that the union was at least willing to engage in serious talks regarding the deal.
Winning the support of the union, which represents 850,000 US manufacturing workers, will be critical to obtaining the broader political backing for the deal during a highly sensitive US election year.
Whether the acquisition is approved or blocked by US authorities for national security reasons, Nippon Steel’s current dilemma has significant implications for Japan Inc as companies pursue growth outside their shrinking home market. With more targets likely to be in the US market, there will be more encounters with America’s increasingly fiery trade unions, and the problem is, Japanese companies do not necessarily have a lot of experience in responding to their tactics.
And those clashes may no longer be confined to outside of Japan. Back in the 1970s, the country’s trade unions also used to strike terror into the hearts of corporate managers. Strikes were common as workers took to the streets demanding higher wages to compensate for squeezed living costs caused by surging oil prices.
After decades of economic stagnation, however, the number of strikes has dramatically declined and many Japanese workers have lost the memory of fighting for better pay. Instead, they had poured most of their energy into making sure that their salaries would not go down further when the economy was in deflation.
Today, the role of labour unions is coming under fresh scrutiny as Prime Minister Fumio Kishida has put pressure on companies to raise wages. The outcome of wage talks this spring will also influence whether the Bank of Japan will raise interest rates for the first time since the summer of 2006. A deepening labour shortage is also giving more bargaining power to workers, who are now gradually starting to switch jobs in the search for higher wages.
With mild inflation, the environment seems ripe for a revival of Japan’s trade unions similar to the one happening in the US. Last summer, department store staff at Seibu went on strike for the first time in more than 60 years. Japan National Hospital Workers’ Union, which represents about 18,000 doctors and nurses working at public hospitals, this week threatened to go on strike on Friday unless wage talks yielded higher pay and more staff.
Still, there is an underlying vulnerability to how Japan’s trade unions are structured. The relationship between unions and corporate managers is never going to be too hostile given that the unions are directly attached to companies and the welfare of the employees will depend on how well the company performs.
Wakana Shuto, labour relations expert at Rikkyo University, says the way unions fight corporate managers is fundamentally different in Japan. She says the unions work more closely with management to overcome differences, preferring negotiation rather than going on strikes. “Through those negotiations, the unions become weaker because they are incorporated [into the management side],” she added.
Even without the strikes, there are some signs of optimism that wage increases are spreading beyond a cluster of big firms. While most of the unions are still linked to large companies that predominantly represent the interests of full-time employees, some have been successful in winning pay rises for part-time workers belonging to smaller subsidiaries as well.
Retailer Aeon, for example, recently agreed to raise the hourly wage for roughly 400,000 of its part-time employees by an average of 7 per cent this spring in a sign that the wage increases are trickling down to broader parts of the society.
As Japanese trade unions become less docile, corporate managers may get some of the training they need to address the more aggressive demands from workers elsewhere. Nippon Steel, at least, is still hopeful that its traditional method of holding persistent talks with unions will bear fruit. But its real battle will begin if and when the acquisition of US Steel is complete because the company will need to make even tougher decisions about jobs and plants in the future.
