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Reports on Japan’s Wages show very different stories

May 31, 2007
By Ken Worsley


Over the past two months, we’ve seen household spending in Japan inch up, income and disposable income move up a tad, and electronics shipments increase as flat-panel TVs have flown off the shelves here in Japan.

Yet, in the May version of its monthly economic report, the Cabinet Office warned that “without sustainable increases in wages,” it will be difficult to assume that increases in consumer spending will continue.

On Wednesday, the Nippon Research Institute, which is connected to the Cabinet Office, released data showing that “thanks to an ongoing improvement in employment and wage conditions,” consumer confidence in April reached its highest level in 22 months. Although that seems positive, only 11.9% of respondents stated that they expect to see an increase in wages over the coming year, while 30.3% said they expect to see a decline. According to NRI, “Anxiety about unemployment and wage declines has receded and consumers are more optimistic about the economic outlook.”

The data of the NRI report and its conclusions seem to have little basis in reality, and it seems as though the text was written regardless of what the numbers actually were going to show. Then, the Ministry of Health, Labor and Welfare released its Monthly Labor Survey Report this morning.

According to the report:

Average monthly total cash earnings per regular employee in April 2007 were 278,193 yen, down by 0.7%.

Contractual cash earnings were 271,310 yen, down by 0.8% and scheduled cash earnings were 250,969 yen, down by 1.0%.

The real wage index was decreased by 0.7%.

The average monthly total hours worked per regular employee in April 2007 was 154.9 hours, down by 0.8% compared with a year earlier.

The number of regular employees in April 2007 was increased by 1.6% compared with a year earlier. The number of full-time employees was increased by 0.8%, and the number of part-time employees was increased by 3.6%.

The decline is slight, but shows that there is still trouble brewing under the surface of economic recovery, and perhaps that it is not so widespread, despite BOJ Governor Toshihiko Fukui’s recent claim that the recovery has finally reached small businesses. How this wage data reacts over the next few months will be worth watching.

Consumer spending accounts for about 55% of Japan’s economy.

Filed Under Cabinet Office, Labor and Wages 

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Comments

8 Responses to “Reports on Japan’s Wages show very different stories”

  1. Adamu on May 31st, 2007 3:53 pm

    I think it’s worth mentioning that the percentage of non-regualar employees has risen from 1/4 to 1/3 of Japan’s workforce since 1998, which is one of the main factors pushing down wages.

  2. George on May 31st, 2007 10:16 pm

    The figures you cite suggest that total wages being paid out are actually INCREASING slightly.
    Total Hours worked -.08
    Total Earnings Per Worker -.07
    Number of workers working .08 ( 3.6)

    Imagine 1000 workers earning Y1000 each in April 2006. Total wages= Y1M
    In April 2008, that calculation turns into: (1000*1.08)*(1000*.93) (more workers, lower paychecks each), or Y1,004,400. That isn’t a big increase (.4%), but it sure isn’t a decline in total wages.

    I’d be curious about the statistical significance of these changes, but I have no idea about how big the standard monthly deviation is. Any thoughts?

  3. Ken Worsley on May 31st, 2007 10:20 pm

    Decrease is in overtime pay?

  4. Ken Worsley on May 31st, 2007 10:22 pm

    Also Adamu, there’s no doubt that pay is being pushed down due to the sheer number of highly paid baby boomers moving out and low-paid freshmen coming in. This year is the largest group of incoming workers in a while.

    That could also explain part of what George is talking about. The calculation in his comment seems to assume that the base hourly wage does not change, when in reality it does, and has changed quite a bit this year. Also, any teate earnings would also be thrown off in April, and for many folks in certain industries, this can add up to quite a bit.

    There’s no doubt that the average hourly pay is lower this April than last, with March 31 being the last day for retirees and April 1 the first day of work for new grads. I know there’s another report on this out and I’ll get it up ASAP.

  5. Marc on June 2nd, 2007 12:06 am

    George, that math makes no sense at all. If I’m on salary and my pay is not increased, I’m not making more. It doesn’t matter how many hours I work, I make the same amount of money on salary. If a lot of highly-paid people in my company retire (or quit) and are replaced by cheaper people, the average salary goes down regardless of how many hours are worked.

  6. George on June 7th, 2007 1:41 am

    Ken,

    In regards base hourly wages, my calculations how they must be changing–for the better. On average, monthly wages per worker are going down (-.07%). But hours worked per month per employee are going down even more (-.08%). So on average, people are getting paid SLIGHTLY more per time worked. Again, I wouldn’t bet money that difference is statistically significant.

    Marc,

    If were were seeing “lots of high paying retirees being replaced with cheap new workers,” than we should see average wages decreasing by MORE than the decrease in average hours worked. But the data show that average wages is decresing by LESS than the decrease in average hours worked.

    Sure, it sucks for you if your monthly take home goes down. The point was that there is more money being paid out into the economy in the form of wages. Read the employment statistics part of the post–the number of REGULAR employees are going up (incidentally, by the same amount as hours worked per person are going down). So yes, you might get a little less, but that it more than made up for (in the aggregate) by people who were getting squat and now get a paycheck.

  7. Ken Worsley on June 7th, 2007 1:51 am

    George, total hours worked really bear no relation to monthly wages for salaried workers, and they can’t even be considered as reported accurately in Japan, due to the sheer amount of unpaid zangyou that takes place. They simply fluctuate too much to be a reliable method of relational calculation.

  8. Bank of Japan decided to leave interest rates at 0.5% - for one more month? : Japan Economy News & Blog on December 2nd, 2007 10:43 pm

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