Salary is not compensation for labor

March 20, 2023
by Noriyuki Morimoto

What do people who work for a company consider their salary and bonus to be compensation for? Some may think it is the price for the pain of labor. But in today’s world, is it possible to hold such a view that salaries and benefits are compensation for the disutility that is labor?

Dualisms such as employer and employee, manager and worker, or capital and labor, can certainly exist in principle under the modern capitalist system, even as it has been highly modified from capitalism in its original form. However, in the personnel system in modern business organizations, there is no sharply antagonistic relationship between the employer and employee, or, for that matter, even a clear distinction between them. It is common for those in the position of managers to originally have been regular employees of the company.

In the modern corporation, the issue is the internal HR system that covers both those who hire and those who are hired, and to focus on the ultimate issue, it is the system that produces competent management personnel, or those who are on the managing side, from that single organization.

In this regard, from the perspective of corporate governance, it seems necessary for those at the management level to consciously distance themselves from the overall organization to which they once belonged in order to function properly. Or, on the contrary, should we dare to use the term “Japanese-style” management and see its characteristics in the continuity between the mindset of the employer and that of the employee?

It should also be noted that for a company, employees are often also customers. This was the case during Japan’s rapid economic growth, and in general, the role of mass consumption in economic growth is extremely important in any country. During the period of rapid economic growth in Japan, amid intense labor-management conflict, wages were actually raised rapidly, which stimulated consumption and supported growth. The Abe administration’s shift to an emphasis on employment may be due to its focus on the importance of mass consumption in its growth strategy.

In any case, when the corporate governance theory is extended to the corporate stakeholder theory, there is no such thing as a simple labor-management conflict theory. Therefore, at the very least, salary and the like cannot be said to be compensation for the disutility of labor. So, what is a salary compensation for? This is a difficult question.


[Category /Human Capital Investment]

Noriyuki Morimoto
Noriyuki Morimoto

Chief Executive Officer, HC Asset Management Co.,Ltd. Noriyuki Morimoto founded HC Asset Management in November 2002. As a pioneer investment consultant in Japan, he established the investment consulting business of Watson Wyatt K.K. (now Willis Towers Watson) in 1990.