Japan’s lifetime employment and low pay risk brain drain.

Japan faces the prospect of falling behind other countries in the race to foster high-tech businesses unless domestic companies offer competitive pay and revamp outdated employment practices, the nation’s most influential business lobby warned on Monday.

The Japan Business Federation, known as Keidanren, will issue its warning in the annual guidelines next month as member companies prepare for the country’s traditional spring negotiations with labor unions.

The emphasis on rethinking the pillars of Japan’s labor market — including seniority-based raises and lifetime employment — represents a departure from past guidelines, which focused on wage hikes.

Hiroaki Nakanishi, Keidanren’s chairman, said he felt “a strong sense of crisis” as companies struggle to adapt to the digital economy. Retention and training of tech workers represent an “immediate” priority for the federation, he told reporters Monday.

Pay at Japanese tech companies averages 1.7 times as much as salaries across all industries nationwide, government data shows. But that salary multiple looks small compared with 9.2 in India and 6.8 in China.

Japanese tech workers have expressed dissatisfaction with their pay packages, and Keidanren thinks domestic companies cannot compete under the status quo. “The risk of overseas outflow of talent is rising excessively,” the upcoming guidelines will say.

The spring labor talks officially begin when the heads of Keidanren and the Japanese Trade Union Confederation, known as Rengo, meet at the end of January.

Keidanren’s shift is driven by Nakanishi, who doubles as the executive chairman of Hitachi. He thinks that higher pay and other incentives are needed for individuals with top talent to feel that their work contributes to their employer.

Big corporations’ traditional mass hiring of university graduates in April does not mesh with the rise of midcareer and year-round recruitment, the guidelines say.

Keidanren also suggests granting higher pay corresponding to work duties, as well as awarding raises based on performance. The lobby has advocated for an increase of strictly defined professional roles as well.

Japanese corporate hires are often groomed as generalists, with no fixed course for the work they perform or where they are stationed. But Keidanren urges that an artificial intelligence system developer, for example, carry out only the work stipulated in the job contract.

The developer would receive a high salary in return for no restrictions on overtime.

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