(Bloomberg) -- Japanese Prime Minister Shinzo Abe dropped a key element of his labor reforms following the discovery of hundreds of errors in data provided to support the legislation.
Abe said late Wednesday that his government would remove from planned legislation a proposal to expand the so-called discretionary labor system, under which more employees would be paid for output, regardless of hours worked, to boost productivity.
The decision has prompted one of the main opposition parties to launch a critique of another aspect of the package. The government will still seek to pass the three remaining aspects of the legislation in the current session of parliament, Abe said. These are as follows:
- Limit overtime and impose penalties for breaches
- Narrow the differences in treatment of full time and casual or contract workers
- Loosen the restrictions on overtime for highly paid professionals
The retreat is nevertheless an embarrassment for Abe over what he has called a “historic” bid to combat a labor shortage as the world's third-biggest economy ages. Making the labor system more flexible is difficult in a country where life-long employment is entrenched, and where long hours and a lack of help for working parents are common.
“There is still a big problem,” with the proposals, the opposition Democratic Party said in an emailed statement Thursday. “That is the ‘high-level professional system.' which allows the legal imposition of excessively long hours and could lead to death from overwork.”
The party urged Abe to drop this part of the proposal as well.
Akio Mimura, the Japan Chamber of Commerce and Industry's chairman, told reporters in Tokyo that it was unfortunate that Abe dropped the key reform, according to Kyodo News. His comments reflect that of big business in Japan, which has pushed for a broader work reform agenda.
Apologies, Opposition
Abe told parliament last month that workers on the “fixed pay” system tended to put in fewer hours than their peers, but the government survey he cited was later shown to be full of mistakes -- including one employee doing 45 hours overtime in a single day. He's repeatedly apologized for citing the survey.
Abe has said that the package of measures will help people combine work with caring for children or elderly relatives. Changing working practices is “the biggest challenge of Abenomics,” he said Wednesday. The three remaining pillars will be submitted to the ruling parties before being approved by the cabinet, he added.
A poll published by FNN on Feb. 12 showed that 43.7 percent of respondents had positive expectations for the package, while 51.1 percent said they did not.
Robert Feldman, a senior adviser at Morgan Stanley MUFG Securities Co., said he disagreed with some parts of the proposals, and that the government should use the setback as an opportunity to re-think the whole thing.
“Some parts of this would be very contractionary for the economy,” Feldman said in a phone interview. “For example, cutting hours without raising hourly wages at the same time by the same proportion would be contractionary.”
To contact the reporters on this story: Andy Sharp in Tokyo at asharp5@bloomberg.net, Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net.
To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Russell Ward, Jason Koutsoukis
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