Japan Small And Medium-Sized Biz, No Wage Hikes:

 Article Source:

https://mainichi.jp/english/articles/20230128/p2a/00m/0bu/022000c

Article:

TOKYO -- Thirty-two percent of small- and medium-sized businesses in Japan "will not" or "cannot" implement wage hikes anytime soon despite Prime Minister Fumio Kishida's call for increases, a recent survey conducted by an insurance firm has revealed.

Daido Life Insurance Co. on Jan. 26 announced the results of its survey targeting the managers of some 9,000 small- and medium-sized companies nationwide. Although raising wages is a cherished policy of the Kishida administration, the survey indicated that many businesses are unable to do so as they are suffering from rising procurement costs due to the historical weak yen and high commodity prices.

Ideas:

It's not a surprise that small and medium sized business say they can't or will not implement wage increases in April

The inflation situation most likely has hit small and medium sized companies harder than larger companies that have more resources to ward off some of the inflation challenges.

Small and medium sized companies don't have the resources and as such are more prone to shocks or continued challenges that big companies are able to withstand.

Bigger companies also have the advantage of better supply chains which help them with lower cost resources that small companies don't have.

The Kishida administration shouldn't punish the small companies that don't have a choice and they profit margins are just to thin for wage increases.

At the same time small and medium sized companies should be given subsidies related to energy and raw material cost increases.

Article:

The survey was conducted in December 2022. Thirty-four percent of the respondents answered that they "plan to raise wages (including those who have already done so)." In contrast, 18% said they "will not implement" wage hikes, while 14% said they "intend to raise wages but are unable to do so."

When asked about the specific rate of wage increases, "2% or higher but less than 3%" accounted for the largest percentage, at 28%, followed by "less than 2%" at 25%. The most common reason given for not being able to raise wages, with multiple answers allowed, was that "the economic outlook is uncertain," at 69%. By industry, 42% of the respondents in the manufacturing industry expressed their intention to raise wages, while only 23% of the respondents in the retail industry did so.

By size, 55% of companies with 21 or more employees responded that they "intend to raise wages," while only 20% of businesses with five or fewer employees said so.

Ideas:

A 2 percent increase in wages probably is not really enough for a household to reduce their inflation costs but its better than nothing. 

At a 2 percent wage hike many households are still going to see their disposable income less that the cost of inflation. Which means they will continue to not be able for things other than their daily necessities over time.

Manufacturers are probably in a better position to offer wage hikes while those in retail are limited as maybe consumers with their limited extra income are refraining from shopping that much.

Perhaps again small and medium sized companies should be given some kind of subsidy as a way to reduce their energy and raw material cost and that way they can maybe find a way to provide wage hike for their employees.

The subsidies can be done at least until inflation begins to flatten out and or stops increasing and small and medium sized companies can rebuild their profit margins to the point of being able to provide wage increases to their employees.

Have a nice day and be safe!