Panasonic to Pay China Workers Compensation for Smog

Panasonic has agreed to pay employees sent to China a bonus as compensation for enduring the country’s poor air quality.

The agreement, believed to be a first for a multinational corporation (MNC), was part of a wider deal reached in Japan’s annual labour talks, which saw major firms, including Panasonic and Toyota, agree to boost workers’ salaries for the first time in years. The deal comes ahead of Japan’s introduction of a sales tax rise next month, which has triggered concerns of an economic slowdown.

A document issued by Panasonic following the talks stated: “As for the premium for expatriates to compensate for a different living environment, the company will have a special review for those sent to Chinese cities.” However, the company did not elaborate on the size of the premium or state how many of its workers would be eligible – although reports suggest that Panasonic employs around 70,000 workers in China.

The payment is for what the company describes as the ‘PM2.5 problem’, referring to tiny particles in the air that at sufficient quantities reduce visibility and increase health risks, and is part of a package negotiated annually for employees in China who are members of the Panasonic union.

Setting a trend?

Commenting on the deal, Professor Kamel Mellahi, of the UK’s Warwick Business School, who researches corporate political strategy in emerging markets (EMs), said: “Although multinationals have always paid a premium for risks and compensated employees for lower quality living in certain parts of the world, this is the first time a multinational has decided to pay a premium for pollution.

“This puts huge pressure on other multinationals to follow suit. Given the high status of Panasonic in China, one expects other multinationals to start introducing something similar.

“The payment makes sense given the dangerously high level of pollution in some urban cities like Beijing and Shanghai. Other multinationals have compensated their employees for a bunch of issues but have not explicitly labelled it as compensation for pollution. They often justify it as adjustment for variations related to occupational health and safety risks. But have Panasonic opened the Pandora’s box by introducing this practice?

“Will Panasonic roll this over to other locations where pollution is high? That will be interesting to see. The reported high level of particulate matter in some Chinese cities measuring 2.5 micrograms can lead to a number of health troubles.”

Earlier this month, a top Chinese environment official admitted that air quality was below national standards in almost all China’s major cities last year, after premier Li Keqiang pledged to ‘declare war’ on pollution. Measures include closing 50,000 small coal-fired furnaces this year, cleaning up major coal-burning power plants, and removing six million high-emission vehicles from the roads.

Only three out of the 74 cities monitored by the government met a new air quality standard, said Wu Xiaoqing, a vice minister of environment protection, underscoring a problem that has triggered health concerns and increasingly angered the public.


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