Japanese Firms and Wage Hikes: Updated June 14, 2024.

 

Japanese firms offer highest pay hike in 32 yrs in spring wage talks

Article Source:  https://mainichi.jp/english/articles/20240520/p2g/00m/0bu/043000c

Ideas:

 Wage increase are good, even more if its over the current inflation rate. And yes, a brain drain is very possible, as even in Japan workers now will move to companies that offer higher wages.

19,480 is a good number but again, will it help to cover the increases related to inflation that many Japanese households are now experiencing.

But the problem is, and maybe mentioned later in this article, that many small and midsize companies didn't give the same wage increase as large Japanese companies.

The average for all companies might have been 3.99 percent while large companies had a wage increase of 5.58 percent, which slows a large variance between small and large companies.

In defense of small and mid-size companies they most likely don't have the needed resources to offer the same wage increases as large Japanese companies.

And then there is the idea, that many small and mid-size companies are suppliers to large companies and large companies might not like the idea of the small supplier companies pass-on their wage increases in prices.

The Toyota group is the company that might have started the deflation situation, when in the early 2000's as a way to remain competitive with Chinese companies, decided not to offer any wage increases and it was that way, mostly up until last year.

And then all companies followed Toyota with no wage increases for many years, which might have contributed to the deflation/inflation situation.

The problem or challenge is, Japanese companies follow the market leader and or the company with the most economic power, which in this case is/was Toyota, so they did what Toyota did with no wage increases.

The sectors mentioned, steelmakers, machine makers, and shipbuilders, are all heavy industry companies and, these days, it might be getting harder to find quality talent to work in these industries and or the companies are not near or in the main metro areas and younger workers might not want to work in a smaller city.

Non-manufacturers, which are usually service sector companies usually have profit margins that can't handle large wage increases.

As I surveyed a well-known hotel business in Japan, and looked at the prices just to see if they have gone up, they have increased significantly. The hotel is a well-known business type hotel but it seems their prices seem very high now.

But it not surprising as the hotel business in Japan is probably doing very good now, and making up for lost revenue during the pandemic.

And of course as demand is high companies increase their prices so it not a surprise that this hotel chain increased it prices.

Anything over 5 percent is good, but again, unfortunately, maybe many small and mid-size companies didn't get the same kind of wage increases.

But whether good or not so good, that is a market economy, where larger companies have more resources and smaller companies don't have the same resources.

The challenge is, as usual, an economy of haves, large companies, and an economy of have nots, small and midsize companies, which is going show up in less consumer spending in the Japanese economy, over time.

Have a nice day and be safe!