Japan And Real Wages: Updated May 11, 2023.

 

Japan's real wages fall in March for record 24th month

Article Source:  https://mainichi.jp/english/articles/20240509/p2g/00m/0bu/021000c

Ideas:

Most likely, what has happened in Japan, for the last few decades, is large Japanese companies, as especially those companies that are publicly traded, has shifted the emphasis from stakeholder emphasis to shareholder emphasis, and focusing on quarterly results, which means employees, were not given many wage increases as companies again, focused on shareholders and not employees.

So after decades of maybe not many wage increases the Japanese economy is stuck in stagnation, and even though wages were increased, in April of 2023, if wasn't near enough to get the Japanese economy out if its current stagnation phase, as wages are only once a year while inflation can be monthly,

There is as strong synergistic effect meaning, as household purchasing power continues to be eroded it can affect many different areas related to consumer spending in the Japanese economy.

Nominal wages are wages with inflation, and don't really tell the exact story. So though wages, including overtime, might seem good, what isn't explained is how much inflation takes away from the real wages over time.

Nominal wages might have increased by 0.6 percent but inflation might have increased by 3.5 percent, so there is a real difference between wages and inflation, which makes wages even less. which means less buying of many things in the Japanese economy. 

Most Japanese workers don't work for the large name-brand companies but small and midsize companies, which is similar to most economies in the world, as most workers, globally, don't work for the large name-brand companies.

The fact that only 20 percent of small and midsize companies were able or willing to increase wages by more than 5 percent, might be an indication they are still concerned with the future of the Japanese economy and or their bottom lines and profit margins just don't allow for much in terms of wage increases this year.

So what is going to happen to the 80 percent that didn't increase wages by 5 percent. Most likely, they might have hiring challenges related to new employees, as their wages might not be enough to satisfy an younger worker who is looking for a good competitive salary, and or a older worker, who still has many years left but is looking for something better.

Real wages is important compared to nominal wages. If real wage growth is more than inflation that means Japanese consumers, or those who got wage increases now have more purchasing power compared to inflation.

But, again, what about the 70's percent of the small and midsize companies that only saw 20 percent of them getting a wage increases of 5 percent or more. That means many small and midsize workers will be stuck, again, without the needed wage increases that is more than the inflation rate.

Which then means many Japanese households or Japanese consumers will not have the needed purchasing power to buy what they want or need, beyond their basic needs and or paying their monthly household bills.

By sector, the services sector was hit the hardest by the pandemic and had to layoff many of its workers and or reduce their hours during the pandemic. 

Now that the pandemic id finished, the services sector is trying to play catch-up with hiring and wages to remain competitive with other sectors.

At the same time, there is a so-called labor shortage in Japan and companies including those in the services sector, are trying to increase wages to get the best possible talent available, and that again, might mean better wages and better work/life experiences.

Each economy is different as its not good to compare one economy to another but wages in Japan compared, to other OECD countries, has decreased overtime, and, again, wage increases in the Japanese economy has not kept up with wages in the EU or the US.

One might say things might be cheaper in Japan compared to the US or the EU, and that is true for many things, but ask the average Japanese household and they might not agree.

The number of hours worked is decreasing each year, as the Japanese, for many, are not the workaholics that stereotypes as someone would describe the average Japanese worker.

That might have been the way it was in the 60's, 70's and 80s' etc. but in the 2000's and beyond the average Japanese workers wants to have their private lives and work lives separate from each other.

Have a nice day and be safe!