Much of the literature on labour compensation confines its attention almost exclusively to wages and other direct forms of remuneration. In a Japanese context, such payments consist of regular wages and bonus payments and are referred to, collectively, as cash earnings. Yet, expenditure on labour also encompasses non-wage labour costs (NWLCs). These cover a broad range of statutory and voluntary costs incurred by the firm. Not only are NWLCs quantitatively important, but their share of total cost has risen through time and their incidence is highly variable across different categories of workers.

We have four main aims in this chapter:

• to investigate the relative importance of the full range of labour cost items in Japan incorporating various breakdowns by industry;

• to examine changes in the composition of costs through time;

• to compare Japanese labour costs with comparable costs in the United States and European countries;

• to attempt a brief rationalisation of the underlying causes of NWLCs.

In general, our objective here is to assess labour costs within a broad, comparative setting. More detailed analyses and discussions of several of the cost categories are contained in later chapters.

Structure and trends in Japanese labour costs

Table 4.1 shows the structure of labour costs in Japanese manufacturing industries over the period from 1965 to 1995.

Direct remuneration is given by cash earnings, consisting of regular wages and bonus payments.