`Wage Increases and Productivity: Updated July 28, 2024.

 

Calls for wage raises as Japan not achieving textbook productivity-led wage growth

Article source:  https://mainichi.jp/english/articles/20240722/p2a/00m/0bu/030000c

Ideas:

Economic textbook ideas are not always followed exactly in the real-world of life or business or society, as there are just too many variables interacting at the same time. Productivity might be improving in Japan, as everywhere, but that doesn't mean wages are going to increase or will increase in the future.

People, CEO's, decide on wages and as such even though productivity in a company might be increasing, that might just mean higher profits, but not an increase in wages, as unfortunately, the average Japanese worker, just like many countries, are just commodities and not real stakeholders in a company like it was in Japan decades ago, as Japan has adopted western style governing which put the shareholder at the center and company workers at the fringes.

Wage growth in Japan might be decades behind Germany and the US, as again mentioned, the early 2000's situation in Japan, when Toyota decided not to increase wages and then all companies did the same, and its been that way ever since until 2023.

And yes, as the article states, shareholders became more important than the Japanese worker, and even though productivity had increased, the emphasis now was on shareholder earnings and again the worker was not given wage increases and the idea was take care of the shareholder and not the worker.

It has been said, that many Japanese companies, especially the big name-brand companies are sitting on a lot of cash, that they could use to increase wages, but ever since the 2008 situation, they have been afraid to use the cash.

Maybe back then, in the 2000's and a little beyond, there was no labor shortage like today, and now companies have to increase wages to get new workers and to keep current workers, as workers now know they might have some bargaining power with regard to increased wages. Before workers had no bargaining power as there more than enough workers for companies and they could pay whatever wages they wanted.

For wages and productivity  to increase in sync all factors need to be lined up correctly, and that, again, is very hard to do. Just like the idea of decreasing inflation and increasing wages together, as there are just too many negative factors affecting the Japanese economy at this time, and its going to take some time for all the pieces of the puzzle to be arranged correctly for wages and productivity to be congruent again, if ever.

Most likely, companies are going to focus on increasing productivity as it helps increase profits which is good for the shareholder, and companies might, as in 2023 and 2024, increase wages, but not to the benefit of the worker, as such, but just to make sure there can avoid a labor shortage.

Today's labor talent, of young workers young college graduates are not the same kind of worker as their parents were and they want and need a different work experience. If companies don't adopt and change, to meet the needs of the 21st century worker, they will continue to have labor shortages, as young workers will easily quit and try to find a companies that meets their needs.

Its a losing proposition, these days, if companies expect young workers to change for the company, as they are not going to do it, as companies need to change from an old-style traditional company to a 21st century company that embraces the 21st century worker.

That doesn't mean the Hollywood style as seen related to tech companies but meeting the needs of the 21st century worker but still being productive and competitive in a global economy today.

Have a nice day and be safe!