Companies and Wages

More recent news and old news is the Japanese government has been encouraging companies, with large cash reserves to pass some of reserves to employees in the form of increased wages as a way to improve low consumer spending.

This seems to be a global problem not just a Japanese company problem. While the US economy, so it seems, is beginning to show real signs of life, compared to the rest of the global economy, US companies have also been somewhat reluctant to increase wages.

Possible reasons for this might be a chicken and egg problem. Employees have been reluctant to change jobs since the great recession, preferring to remain with the current companies. Companies then realize there is no need to increase wages if there is not a lot of demand or change among the workforce. Even more so in Japan.

Second, companies might still be wary of how deep the great recession was and still are reluctant to increase wages and or investments in anything now, in the US, Japan, and the EU.

Possibly even more so in Japan, too many workers are contract or temporary, in which wages are usually lower than full-time or even so called lifetime employment, if there is even such a concept still in Japan, and as such companies feel they don't need or want to invest in its workforce any more than is needed.

This of course might be a short-term or a short-sighted approach of Japanese companies, especially those with most of the business in the Japanese domestic market. Again a chicken or an egg idea, invest in their employees and company by increasing wages, which sooner or later, might begin to see more consumer spending as employees, i.e. consumers begin to feel the increased wage benefits which in turn improve the overall Japanese economy.

But usually companies take a wait and see approach. As long as the economy is sluggish, they will wait and see, and then begin to think about improving wages. Of they wait and see if demand for there products or services improve and then they think about improving investments and wages.

Unfortunately, the wait and see approach is far more common than a more proactive approach of investing the excess cash reserves into more wages and more investments to stimulate economic growth more demand which then the accelerator affect becomes positive, growth and demand increases more growth and demand.

Or the opposite less growth and demand actually promotes less growth and demand.

Lets hope Japanese companies can see the positive of investing in employee wages and more investments overall.


© 2015 Tom Metts,  all rights reserved