Toyota and Honda Announce Largest Pay Raise in Decades
Good news, Toyota and Honda workers: Japan’s two largest automakers have agreed to give their workers their largest pay raise in decades. Bad news, Americans: the raises are only for Japanese workers, who are supported by unions — the likes of which Toyota and Honda have carefully avoided in the U.S. by building their manufacturing plants in anti-union states.
Toyota and Honda both made their announcements yesterday. The former is still in negotiations with its union but claims it will give the largest wage raise in two decades; while the latter says it will raise wages by 5%, its biggest increase in base pay in roughly 30 years.
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The two Japanese automakers typically make these announcements in the middle of March after weeks of negotiations with unions. They have not disclosed why the announcements came unusually early in 2023, but it likely has to do with Japan’s record-high rate of inflation, which has put pressure on businesses and authorities to do something about the population’s shrinking purchasing power.
The Bank of Japan has set a 2% inflation target and says that a 3% wage growth is necessary to support it. In December of last year, Japan’s core consumer prices rose 4% — double the target and the highest rate in 41 years. Nonetheless, the DOJ remains committed to its stimulus program until wages show commensurate gains.
According to Toyota, it is the third consecutive year that it meets its union demands in full. Toyota is typically among the first Japanese companies to announce the results of annual wage negotiations, which can help put pressure on other companies to give larger raises. It also said that in 2023, bonuses would be equal to 6.7 months’ salary.
Meanwhile, Honda’s 5% raise is its largest since 1990 and beats the nation’s rate of inflation. The company says the extra money will largely to go boosting starting salaries as it prioritizes younger employees more impacted by inflation. “Despite the severe business environment, management has a strong desire to create an environment in which all employees can… push forward with their work with a sense of urgency,” a Honda spokesperson told the BBC.
After decades of stagnant prices and wages, Japanese Prime Minister Fumio Kishida has called on business leaders to accelerate raises. “We will boost consumption and expand domestic demand by promoting efforts toward structural wage increases,” he said on Wednesday.
In the U.S., inflation was finally forecasted to slow down significantly in 2023, with wage growth even expected to outpace inflation. However, inflation predictions are error-prone, and consumer prices rose sharply in January — well beyond the Federal Reserve’s target. It’s still anybody’s guess how the economic landscape will shape up.
Kurt Verlin was born in France and lives in the United States. Throughout his life he was always told French was the language of romance, but it was English he fell in love with. He likes cats, music, cars, 30 Rock, Formula 1, and pretending to be a race car driver in simulators; but most of all, he just likes to write about it all. See more articles by Kurt.