The Japanese government has reduced the wages of central government workers by an average of 7.8% for two years from April 2012 with the aim of securing financial sources for reconstruction following the Great East Japan Earthquake in March 2011. In January of this year the government requested local governments to implement wage cuts for local government workers on a par with those for central government workers, but local governments strongly opposed the move. In response, the government submitted a bill to revise the Local Allocation Tax Act to the National Diet to subtract 392.1 billion yen, the equivalent of the sum of wage cuts for local government employees in fiscal 2012 (ending March 2013), from the total sum of the local allocation tax to be distributed to local governments in fiscal 2013 (giving a total sum of 17.624 trillion yen). The bill was enacted on March 29, and the revised law went into effect on April 1.
According to the results of a survey of the response of local governments to wage cuts, announced by the Ministry of Internal Affairs and Communications on April 5, of the 1,766 local governments (prefectures and municipalities) in Japan, only five had approved or submitted to their assemblies ordinances to cut wages in accordance with the central government's demand; 89.4% were considering how to respond.
The original purpose of the local allocation tax is to adjust disparities around the country by redistributing part of the national tax revenue levied nationwide from income tax, corporate tax, consumption tax, and so on in accordance with the financial conditions of local regions. As of fiscal 2012, however, of the 1,766 local governments nationwide, only 55 local governments, just 3.1% of the total, were not receiving the local allocation tax. Indeed, almost all of the local governments rely on the local allocation tax to balance their finances.
Amid increasingly severe fiscal conditions, over the past decade or so local governments have been making determined efforts toward fiscal reconstruction, including the implementation of personnel and wage cuts ahead of the central government. According to statistics of the Ministry of Internal Affairs and Communications, 966 local governments voluntarily cut wages between fiscal 1998 and fiscal 2012, and the total amount of the cuts came to 2.1 trillion yen.
While keeping one eye on the local government assembly, labour and management are continuing consultations. But according to Jichiro (All-Japan Prefectural and Municipal Workers Union), which represents mainly local government workers and is affiliated with RENGO (Japanese Trade Union Confederation), as of June 11 only 429 unions had concluded settlements through labour-management consultations, of which only 214 unions, including Tokyo, had reached "no cuts" agreements. In other words, more than 70% of unions had not yet reached a conclusion.
In view of the fact that many local governments have independently implemented harsh wage cuts, and also the principle that wages of local government workers should be determined in respect of labour-management negotiations in each local government, RENGO, through its regional branches, is urging local governments not to reduce the wages of their workers.