Japan Labor Shortage and Bankruptcies: Updated August 6, 2024.

 

Increasing staff costs driving 'labor shortage bankruptcies' among Japan firms

Article Source:  https://mainichi.jp/english/articles/20240725/p2a/00m/0bu/009000c

Ideas:

Its a very unfortunate cycle of events that have taken hold in Japan, as inflation with the weak Japanese yen, along with now labor shortages have put many small companies in the bankruptcy segment, and there doesn't seem to be any improvement in the future.

Yes, workers need higher wages to take care of their families and pay their bills and feel like they are making a normal wage, but also many companies, might want to increase wages, but their profits margins are so thin, even a small wage increase can affect them, much like a low-income family and any emergency or increase in inflation is a disaster for them.

Its sad that many services companies can't hire workers because they can't afford the minimum wage and or can't afford to pay anything good that will attract workers to their company.

There doesn't seem to be any solution to the situation other than the Japanese economy grow significantly where many sectors, including and especially the services sector can see and feel significant economic growth, but unfortunately, the Japanese economy doesn't seem ready to grow that much.

The Japanese government, before this becomes as crisis, needs to step in with a program that can help these small businesses to overcome the situation. That doesn't mean they carry these businesses but they help them with loans or whatever and maybe help them become more innovative, if possible help them with improvement of their labor situation.

The Japanese government could setup a plan for small companies and, if possible. provide half of the minimum wage to companies and then companies pay the other half. This is similar to what South Korea did when it started to increase the minimum wage, and in that way small companies didn't have feel completely stressed with the wage increase.

But overall many South Korean small and midsize companies either reduced hiring, limited hours, and or went to using robots whenever possible.

Unfortunately, in a market economy bankruptcies are normal, but too many of them can be  crisis for an economy, and Japan might be headed for a crisis unless the Japanese government can find a plan to help small companies.

One option, but time consuming is to bring in foreign labor to work in small and midsize companies, but there is the Japanese language challenge for many foreign workers in Japan.

The idea of the Moon administration in South Korea, was to help minimum wage earners with a livable wage so they could take care of their families and pay their bills, and maybe have some extra income to spend in the South Korean economy.

But of course many small companies were not ready for the minimum wage increase and many companies either, again, reduced hiring, cut hours, and or tried to innovate, if possible with robots.

Sooner or later Japan is going to have to increase wages, minimum wages, but maybe not follow the South Korean example of increasing wages every year like they did, but spread out the wage increases so that companies can prepare and innovate, and at the same time, the Japanese government provide incentives for small companies.

Small Japanese companies need to be flexible as much as possible, find ways to innovate and be more productive, but of course, unfortunately, many small and midsize companies don't have the flexibility to do anything, and the wage increase is just another stress they have to deal with regarding their business.

Again, the Japanese government should setup programs that can help small businesses innovate and become more productive, even though such programs might already exist in Japan.

If nothing it really done the Japanese economy could be facing a small business crisis that could further hurt the economy from growing again.

An economy can't exist on large name-brand companies only as all economies need small businesses to grow and succeed, and most advanced economies were not built on large companies but the thousands if not millions of small and midsize companies.

Have a nice day and be safe!