It has already been established that Japanese bonus payments are significantly larger than in Europe or the United States. Tables 4.7 and 4.8 contain the key comparative international details. This is a unique and important labour market phenomenon and, accordingly, the whole of this chapter is devoted to this topic.

Hypotheses

Profit-sharing within modern Japanese industrial organisations may have deep roots in centuries of agrarian village life where communities realised the advantages of mutual support, co-operative effort and risk-sharing. Over a shorter time span, there is some evidence of links between sharing practices in traditional family businesses in the late nineteenth/early twentieth centuries and the more systematic adoption of bonuses for permanent employees by capitalist enterprises of the post-war period. Initially, bonuses tended to be confined to company executives and only later extended to both blue- and white-collar workers (see Taira, 1970; Dore, 1973; Iwata, 1992). However, we are concerned here not so much with the evolution of the bonus system, but rather with attempts to understand its role within the total compensation structure of the modern firm.

The bonus as a disguised regular wage

As pointed out by Ito (1992), there are several reasons why we might expect, a priori, that Japanese bonuses are essentially disguised wages. First, like wages, many bonuses are determined annually or biannually. From a bargaining perspective, it might reasonably be assumed that annual wages and bonuses are negotiated on the basis of broadly similar performance indicators, including profitability.