Why do/ did Japanese companies increase pay with age?

I was very surprised to learn that it was, according to Kazutoshi Koshiro in A Fifty Year History of Industry and Labor in Postwar Japan, the result of union action and with the aim of redistributing wealth:

“In the fall of 1946, a labor dispute in the government-operated electric power industry led to the institutionalization of an important age-based component in wage determination throughout Japan. Densan, the electric power industry union, demanded not only a large wage increase, but a “living wage” in which a large portion of wages would be determined according to age and the number of dependant family members irrespective of skill, work experience, and educational background. The idea of a living wage quickly spread around the country, bringing a reduction in the wage differentials between blue- and white-collar workers” (page 11)

Unfortunately, one result is that Japanese companies try to avoid hiring older workers, especially those with children. More on that in the next post.

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