Kishida and Wages: Updated Jan. 15

 Article Source:    https://mainichi.jp/english/articles/20220105/p2g/00m/0bu/038000c

Article:

TOKYO (Kyodo) -- Japanese Prime Minister Fumio Kishida asked business leaders on Wednesday to raise wages more aggressively for employees as part of his pursuit of wealth redistribution.

Ahead of this year's annual wage negotiations between management and labor unions, Kishida, who took office in October, is calling for a pay hike of over 3 percent by companies that have seen their earnings recover to prepandemic levels.

"Wage hikes mean future investments. It's critically important for future economic growth. I'd like to see you take an aggressive stance and cooperate," he told a meeting of business leaders who gathered for New Year celebrations.

Ideas:

The idea of wage hikes sounds like a good idea and a good investment for the future. But the challenge is how many companies can do it or want do it. Many companies are now facing supply cost increases along with energy cost increases.

Which might mean the profits margins now are already very thin and they might not have any room to increase wages much less than the 3 percent that Kishida wants to see.

And then there is the idea of shareholders and what they think as maybe they might think wage increases are not as important as dividends payments. 

So companies have a lot to decide about what do to with the Kishida suggestions.

The idea of wealth distribution has been tried in many countries. For example in South Korea the present administraiton has tried for the last 4 years to use the same idea to spread the wealth around to the lower income groups but it seems without as much success as they wanted.

For example, the minimum wage has increased ove the past four years, but for some businesses, mainly small businesses and service type busineses it has become an unwanted cost. As such for some companies they have had to lay off workers, reduce the working hours of part-time workers, and for mom and pop stores only the husband and wife can operate the business as they can't afford any more workers.

Not exactly the same thing with franchise operators in Japan who can't find part-time workers but the same idea of the husband and wife having to run the convenience store by themselves.

Article:

Kishida said the country needs to set in motion a "virtuous cycle of growth and distribution" at a time when recovery from the pandemic comes with opportunities for the new era.

The gathering was organized by the Japan Business Federation, the country's most powerful business lobby known as Keidanren, the Japan Association of Corporate Executives and the Japan Chamber of Commerce and Industry.

Kishida has placed priority on creating a new type of capitalism by ensuring both economic growth and wealth redistribution.

Ideas:

Again the ideas that Kishida is suggeting sounds interesting and promising but can it be done and are businesses and society really willing to see it happen?

Of course workers wants higher wages and maybe even a better society where more have a higher standard of living. But is the structure of the Japanease economy able to handle a "virtuous cycle of growth and distribution" without causing too much strain on the present economy and society.

Will it cause too many distruptions to the economy and society? Meaning can the present structures, as it is, be sustained while the new forces that Kishida wants to see happen begin to take shape.

And just what is a "new type of capitalism"? What does he really mean? Just the ideas of increasing wages doesn't seem to be enough as it depends on the good will of companies to volunatarily increase the wages of their employees.

With all of the contraints that some have now with energy cost increases, raw material cost increases, and of course the pandemic coming back strongly, can Kishida, or anyone for that matter, really expect businesses to voluntarily increase wages when many other costs are increasing at the same time.

Article:

Accelerating wage growth, which has been sluggish in Japan as the country had been plagued by deflation for years, is a key part of his agenda and the government plans to offer tax reductions for companies going ahead with pay hikes.

Keidanren chairman Masakazu Tokura aligned with Kishida over the need for companies to raise pay proactively if they have remained profitable despite the COVID-19 fallout.

"It's the responsibility of companies to distribute (income) to workers. Otherwise, we will lose our raison d'etre," Tokura said at a press conference after the meeting.

Ideas:

But will the tax incentives be enough to get companies to budge on wage increases.? With all the other cost increases maybe its too early to expect much.

And with the pandemic hitting Japan again, there is too much uncertainty now about the economy. But if Kishida and company decide to keep the economy open and not have any or few emergency measures maybe the Japanese economy won't see a lot of a slowdown in the next few months.

But thers is still, for many or some, companies having to deal with the increase in energy costs, the increase in supply or materials costs to think about and deal with and maybe they can't even begin to think about wages increases at this time or even in April.

Yes it would be good if companies can increase wages and it will have a muliplier effect in the economy, meaning it will not only help the company employees, but they might feel the extra income is good enough to spend some in the economy, which means others in the economy will get some benefits and so on. 

But then there is the idea that households are seeing increases in gasoline prices, increases in home energy costs, increases in supermarket food prices, maybe increases now in restaurant prices and so on, and not to mention the pandemic has come back stronger.

As such even if they get an increase in salary that might not be enough to cover all of the other cost increases that households are experiencing now.

Article:

The shunto wage negotiations this spring come as the recovery from the COVID-19 pandemic is patchy and its pace remains uneven among sectors.

The Japanese Trade Union Confederation, the country's biggest labor organization known as Rengo, has decided to call for a combined 4 percent pay hike -- around 2 percent in pay scale and 2 percent in annual pay.

Keidanren, meanwhile, does not plan to encourage its member companies to consider wage hikes across the board.

Ideas:

As seen, it looks like not all of the business confederations are on board with the Kishida plan and some like it and some not so much.

So again its very much a voluntary situation and with the economy the way it is now, with the increasing costs and the pandemic surge again, it will make it even more challenging for companies to increase wages.

Of course the Kishida plan seems like a good idea but the details seem a little ambiguous at this time. Perhaps Japan should look and see how the Northern European countries have been able to "spread the wealth" around there where the economies and societies seem to have a more equitable situation.

But they too are not as well-off as they used to be with increases in the gini coefficent in almost every country globally these days including the Northern European countries.

Have a nice day and be safe!