Japan experiencing shortage of skilled workers
2023.01.31 01:59
Japan experiencing shortage of skilled workers
By Tiffany Smith
Budrigannews.com – Even though some employees in Japan are unable to afford pay increases that do more than offset cost-push inflation, businesses are stepping up efforts to assist employees in the fight against rising prices and a labor shortage by offering inflation allowances and reskilling employees.
As the annual “shunto” labor talks get underway, both labor and management are urging businesses to offer such increases to cushion, if not beat, consumer inflation, which in December reached a 41-year high of 4%.
Major companies, such as Toyota Motor (NYSE:) Corporation, beginning in April, engage in wage negotiations with internal unions.
Firms with a 500-trillion-yen ($3.85 trillion) hoard of internal reserves are encouraging cautious firms to raise wages due to labor shortages and rising consumer inflation, which is double the central bank’s target of 2%.
According to Teikoku Databank, a corporate credit research firm, approximately a quarter of Japanese companies have offered or plan to offer inflation allowances. These allowances typically range from 54,000 yen in one lump sum to 6,500 yen ($50) in monthly payments.
Shinichiro Mori, a groupware developer from Cybozu Inc., said, “I received the money just when we had our second baby.” The company offered the one-time payment of 150,000 yen to all 800 employees.
“I appreciated the money,” said the 41-year-old Mori to Reuters. Because we stayed at home all day to care for our baby, we spent it on baby supplies, utility bills, and other living costs.”
Another illustration comes from the announcement that the Uniqlo clothing chain’s operator, Fast Retailing Co., will alter its employee compensation system, offering raises of up to forty percent.
In conjunction with Prime Minister Fumio Kishida’s “new capitalism” initiative on wealth distribution, which prioritizes wage increases, the private sector anticipates that the drive will contribute to an increase in productivity.
These demands from Japanese policymakers are made against the backdrop of 15 years of stifling deflation, during which businesses put off raising base salaries from the beginning of the 2000s to the beginning of the 2010s. These 15 years saw rounds of stimulus fail to spur economic growth and instead piled up public debt.
According to data from the OECD, workers’ wages in Japan have increased by about 5% since 1990, while wages in the United States have increased by 1.5 times and wages in South Korea have doubled.
Former Bank of Japan board member Takahide Kiuchi demanded that wage increases be sustained over time so that over time, pay increases could offset price increases.
According to Kiuchi, who is currently an executive economist at the Nomura Research Institute, “Bonuses or inflation allowances would have only a limited impact on easing the pain of cost-push inflation, as consumers tend to save one-off payouts rather than spend.”
In order to help private consumption, which accounts for more than half of the economy, the government and the central bank say that inflation must rise in tandem with wage growth. This will allow the Bank of Japan to achieve its inflation target in a sustainable and stable way.
However, whereas a rise in base pay, a salary component that is difficult to reverse, is more likely to boost such confidence and set workers spending more, one-time payments do not make consumers more confident about increasing spending.
The most recent data indicate that real wages decreased by 2.5% in November, marking the ninth consecutive month of decline following a decrease of 3.8% in the month prior.
This year, Cybozu, Mori’s employer, has offered employees a record pay increase between 1% and 10%.
That would be higher than the government’s goal of 3% and even Rengo’s goal of 5%, while Keidanren, Japan’s largest business lobby, urged businesses to offer positive wage hikes, including base pay.
Yumika Nakane, the company’s head of human resources, stated, “We always feel the need to respond to labor shortages of engineers, in particular.” We set pay scales because we know that one way to get employees is to pay them well.
Policymakers lament the absence of demand-pull inflation, which leads to wage growth, despite a December unemployment rate of 2.5 percent, which reflects the tight labor market and steady job availability at a ratio of 1.35 per seeker.
A survey of 33 economists conducted by the Japan Economic Research Center (JERC) revealed that large companies are likely to offer the largest pay raises in 26 years at this year’s shunto talks, or an average of 2.85% for the fiscal year beginning in April.
However, a separate poll conducted by the Jonan Shinkin Bank and the Tokyo Shimbun newspaper revealed that more than 70% of small businesses—which employ seven out of every ten workers—have no plans to raise wages.
Authorities want to increase labor productivity and encourage more workers to switch to industries with better growth prospects in order to encourage small businesses in this direction, provided that they will not run out of jobs.
The government of Kishida intends to use 1 trillion yen in human resources over the course of the next five years to give new support to businesses that hire workers in the middle of their careers and to reskilling efforts to reduce employee turnover.
This year’s labor talks, which they hope will address the tight labor market and counteract cost-push inflation, have high expectations among workers.
Some businesses are willing to take the lead.
For instance, the “reskilling center” of the Internet media company Cyberagent has trained 200 information technology engineers to meet the company’s needs and attract engineers from outside.
It will also increase the starting salary for recent graduates by 12 percent to 420,000 yen beginning this spring.
Hiroto Minegishi, the company’s general manager for technical human resources, stated, “As the IT industry faces a lack of engineers, we can contribute to resolving the labor crunch by cultivating human resources, which is our strength.”
“As a consequence of this, we are able to support wage growth and boost productivity across the IT industry.”
