Japan Small Firms And Wages: Updated Dec. 4, 2024.

 

Rate of small firms in Japan hiking wages rises to 63% in FY 2024

Article Source:  https://mainichi.jp/english/articles/20240422/p2g/00m/0bu/020000c

Ideas:
Its good that small and midsize firm are giving wage increases, but most likely they just don't have the profit margins as large Japanese companies do, and as a result the increases wage will be much smaller.

At the same time, as there is a so-called labor shortage in Japan, small and midsize companies are giving wage hikes as they need to make sure that they can get the best talent possible, and the wage increases might help.

It must be remembered, that 70 percent of the Japanese workforce don't work for large Japanese companies, but small and midsize companies only,

Japanese small and midsize companies are in a difficult situation as maybe they again, don't have the profit margins that large companies do, which means their labor costs and material costs are much more significant compared to large companies.

And then there is the idea of passing-on increased costs to the next in the supply chain, which most likely is the final retail customer, as maybe customers are elastic, meaning they react significantly to price increases.

And yes, there might be some or many small and midsize companies that just can't afford wage increases, which might mean their current employees might be looking to change jobs to a company that can give wage increases.

Sometimes it is assumed that most people work for large companies and the same in Japan, but the fact is around the world most people don't work for large companies, but the challenge is small and midsize companies need to pay the same as large companies but many of them don't.

Another part with small and midsize firms is many of them in Japan are suppliers or contractors for large Japanese companies, which puts them in a very difficult position.

If they are a supplier or contractor for a large Japanese company, most likely the large company might put pressure on the small company not to increase parts or service charges, and if they don't agree, they could lost their contracts.

And that means as material prices increases along with energy prices their profit margins shrink which means they can't increase wages like large companies can do.

If small companies can't increase wages that means their employees can't afford to pay their bills and or they have little or no disposable income left to use in the Japanese economy.

And then, again, there is the idea of labor shortages which means those employees, might want to change jobs to companies that can have wage increases, as its possible there are more jobs available to choose from.

As 70 percent of Japanese workers don't work for large companies, and as the 70 percent might not get the wage increase that large companies do, that then means a large group of workers in the Japanese economy can't spend much and consumer spending will not be enough to help with economic growth.

Most likely many companies were fearful of losing employees if they saw other companies increasing wages and they weren't.

They all know inflation is out there but they wait and see what the other companies are going to do about it. When a market leader or influential company such Sony or Toyota or Panasonic finally increase wages then other companies begin to do the same thing.

As, again, as there is a so-called labor shortage, many companies are afraid of losing their best workers and so they begin to improve benefits and other situations in a company including increasing wages.

Have a nice day!