Japanese Firms and Wages: Update Dec. 21

 https://mainichi.jp/english/articles/20211205/p2g/00m/0bu/019000c

Article:

TOKYO (Kyodo) -- Nearly half of Japanese firms will raise wages even without further tax incentives for company pay hikes that the government is planning to introduce next fiscal year, according to a survey by a credit research company.

The survey by Teikoku Databank Ltd. indicates that more managers are prioritizing higher wages to attract and retain workers amid the country's longtime labor shortage and rapidly graying population, although the economic outlook remains uncertain due to the fallout from the coronavirus pandemic.

Ideas:

Its good that Japanese companies are going to raise wages despite the incentive by the government. But the key point might be how much are they going to increase wages and will it be enough for workers that they will feel good about it. 

Yes something is better than nothing, but with the increase in gas prices, oil/electricity prices, supermarket prices, and restaurant prices is it going to be enough despite the increase in prices in many different area.

So how much extra income will worker/consumers have when you add in the increase in wages but take out the increase in prices in many different areas. How much disposable income will consumers/workers have to use in the economy.

And yes, whenever there is a shortage of anything prices usually go up. And in this case a shortage of workers, even professional workers, means companies now have to compete to attract the workers they want or need.

Also, as the workforce is turning younger, the younger workers don't want the same kind of work lifestyle as their fathers. They are looking for more of a work/life balance and not working 12 hour days that was in the past. 

So companies have to be aware of what young workers want and need if they expect to attract those they need. And they should understand that most of the young workers don't expect to stay with the same company their entire career as maybe their father did. 

So companies need to be very flexible with they current group of young workers as they see themselves as being much more innovative and flexible and they might always be looking for that next job.

Article:

The ruling Liberal Democratic Party and its junior partner Komeito are considering expanding an existing tax reduction system to encourage companies to raise wages as part of a tax reform package for fiscal 2022 starting April, under Prime Minister Fumio Kishida's signature policy of correcting wealth disparities by boosting middle-class incomes.

In the survey conducted in mid-November, 802, or 48.6 percent, of the 1,651 companies that responded said they will raise wages regardless of the scale of tax breaks. Nearly 90 percent of those surveyed were medium-sized companies such as those that have capital of up to 300 million yen ($2.6 million) or up to 300 employees.

Ideas:

The idea that companies are considering wage increases might indicate that they have room within their profit margins to increase wages which are a cost. But again the idea is how much will they increase wages. Or a better idea might be will the increase be of benefit to the workers, and will it benefit the idea of correcting wealth disparities.

Just because middle-class incomes might increase is good, but the increase has to be enough that families or whomever feel good enough about the increase that they will begin to use some of it in the economy. And with the increase in prices in many different areas, the wage increase has got to be big enough to overcome the increase in prices or a families disposable income might be like there was no salary increase.

Most likely large companies, of course, can afford larger increases in wages, if they choose to give salary increases, but how much can medium-sized companies or even small companies afford if their profits margins are much smaller than large companies which is usually the case.

Article:

The figure stood at 53.6 percent among large companies, compared with 47.9 percent among small and medium-sized businesses.

Of the total, 8.5 percent said they would raise wages if tax incentives are expanded, while 22.3 percent said they would consider increasing pay, meaning "79.4 percent of the total were positive" regarding wage hikes, Teikoku Databank said.

Meanwhile, 8.1 percent replied that they were unable to increase wages regardless of the scale of tax breaks and 12.5 percent said they were not sure what they would do.

Ideas:

While its encouraging that companies are considering increasing wages, April is still a long time away with all that is going now and and in the future with the pandemic situation.

And there is the idea that companies, listed companies, are always under pressure to present respectable quarterly results. So they are always stressed  and the ideas of increasing wages might not be a priority of a company that is always worried about the next quarter results and what shareholders might think.

As such, while companies might consider wages increases now, they might not be too willing come April 2022, and the pandemic now is again out of control, and with all kinds of continued external variables that companies have no control over.

By April 2022, the 8.1 percent could grow larger and the 12.5 percent could grow larger too with all of the external variables in play in Japan and globally.

Article:

Under the current system, if salary payments for newly hired workers are raised by more than 2 percent from the previous fiscal year, large companies get corporate tax deductions equivalent to 15 percent of the payments.

Small and medium-sized companies also get a 15 percent tax deduction when salary payments for all employees are increased by over 1.5 percent.

"The labor crunch had eased due to the economic impact of the coronavirus, but it has become significant again. Under such circumstances, attracting and keeping employees has emerged as an important challenge for many businesses," said a Teikoku Databank public relations official.

Ideas:

A 2 percent increase and a 1.5 percent increase might be considered good in a time when a lot of prices that affect consumers are not increasing as fast as they are now. And as such a 2 percent increase and a 1.5 percent increase, again, might not be enough to cover all of the increases for consumers now or in the future.

Most likely even with a 2.0 percent increase in wages, its still possible that a consumers disposable income or extra income is not going to be much more than before all of the price increase started.

But then if you add in what companies might be dealing with such as increases in supply costs, gas/oil price increases, and along with other costs that might be increasing, all of these increases in costs that some or many companies are now facing, can they afford to increase salaries more that 2 percent or 1.5 percent as their profit margins are shrinking which means all of the increase in costs are crowding out any real increases in wages or needed investments.

And as the pandemic, in some cases, has eased some, workers maybe are beginning to think about changing jobs again, which means to get or keep the workers they needs or want companies have to be generous or competitive with what they can offer workers, from competitive salaries within their industry, to other benefits including reasonable work/life balance situations.

Article:

Since taking office in early October, Kishida has said he will aim to encourage pay hikes through tax incentives. Late last month, he said he hopes businesses that have recovered to pre-pandemic levels will raise wages by more than 3 percent.

The Cabinet is expected to approve the tax reform package late this month after getting the thumbs-up from the ruling coalition.

Ideas:

A 3 percent wage increase would be even better of course than a 2 percent or a 1.5 percent. But how many companies are thinking that much and can they even afford that much with all of the prices increases and with the pandemic still out there.

Again April is a long way away and anything can happen. If a company is risk-adverse they might think twice about a wage increase by April.

But if there begins a swell of workers thinking about changing jobs and as the new graduates come into play in April companies might not have a choice if they want to attract the new workers they want. 

If there are 115 jobs to every 100 workers that means new workers have a choice and they are looking for good working conditions, a competitive salary, and a good work/life balance in a company.

Before April 2022 companies have a lot to think about to attract new workers or keep existing workers.

Have nice day and be safe!