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Japanese wages continue freefall

February 4, 2010
By Ken Worsley


On Tuesday, the Ministry of Health, Labour and Welfare released its figures on wages for December 2009 and for 2009 as a whole. First, taking a look at the December figures, we see a fall of 6.1% in wages at firms with at least five employees against a year ago, with the average total wage clocking in at 549,259 yen. That figure may seem high, but winter bonuses are usually paid in December, and bonus payments fell by 10.6% against a year ago. December’s overall wage decline follows a 2.4% fall in November.

When companies with 30 or more employees were looked at, the average wage fell by 6.6%, following a 2.8% decline in November.

For 2009 as a whole, average wages at firms with five or more employees fell 3.9%, with salaries falling 1.2%, overtime pay plunging 13.5% and bonuses seeing a 12.1% drop. This equates to an overall decline of 2.9% in real wages.

At the same time, the average number of hours worked slumped 2.9% in 2009, while overtime hours fell 15.2%. Truly disturbing is the 32.2% decline in overtime hours at manufacturing firms.

According to the Ministry, 2009 is the third consecutive year in which average wages have fallen. Hope for Japanese consumers and households to spend more and thus spur a meaningful economic recovery seems more quixotic with each passing month.

Out of all of these statistics, however, one stands out as the most disturbing. In 2009, the number of regular full time workers declined by 0.9% to 32 million while the number of of part-time (or short-term contract) workers increased by 2.6% to about 12 million. Although I previously predicted that contract workers would continue to increase as a percentage of the overall working population, it still seems bewildering that Japanese firms cannot (or will not) pay enough for their workers to purchase the proverbial Model T.

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Comments

5 Responses to “Japanese wages continue freefall”

  1. Adamu on February 5th, 2010 9:28 am

    Japanese businesses are out of ideas, so they are “extending and pretending” by making gradual cuts here and there while trying to preserve the overall system and the seishain way of life. In the process, seishain are disappearing slowly through attrition as “contract workers” with starkly fewer benefits step in to take their place. Many firms are so bloated they worry that raising wages would just kill their businesses. Maybe the child allowance can redirect some corporate revenues back into people’s pockets, making the managers’ decisions for them and not forcing them to choose between wages and profits. Maybe.

    Whatever the case, praying for more seishain isn’t going to help matters. There is a magical belief in Japan that companies should be able to give every worker lifetime employment with generous benefits. This creates a situation where the permanent employees are treated too generously and are not replaced quickly enough to give the same opportunities to new recruits. Hence, the younger generation is left to fend for scraps aka crappy temp jobs (along with those unlucky enough to fall between the cracks of the new graduate hire process)

    Unfortunately the current government believes in magic. Postal reform minister Kamei just announced he will try and force Japan Post to offer full time positions to any part timer/temp who asks. If he doesn’t follow that up with a drastic redefinition of “full time employee” then you can expect the postal workforce will become very very expensive.

  2. Ken Worsley on February 5th, 2010 6:30 pm

    Adamu, Good point in second paragraph. I agree with that, but I’ve also decoupled “seishain” and “lifetime employment” in my own thinking, which I realize is not yet the case in reality. But I do think decoupling the two can be done, should be done, and would be better than what we’re seeing happen.

  3. Nigel on February 7th, 2010 9:57 pm

    Until reading this article I was totally ignorant of how badly the global crisis had hit other countries.

    I only found this article as I was looking up information on the japanese economy as a long term plan for migrating to Japan in the future.

  4. J on March 9th, 2010 7:49 pm

    Nigel-this has been happening in Japan since the 90’s…it is so the higher-ups can continue to receive their huge salaries while cutting that of the “lower” workers…As for the Postal situation, they can do whatever they damn well please since they have so much cash that they can wipe their arses with it! 1.3 trillion bucks or more

  5. J on March 9th, 2010 7:50 pm

    it makes sense that wages fall during deflation, economics 101

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