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Japan’s labor force: Lower bonuses, more part time workers

The Ministry of Health, Labor and Welfare’s most recent report on the state of Japan’s labor force is not encouraging. According to the report, 6.2% of Japan’s workers are satisfied with their current pace of pay increase, compared to 15.7% in 1990. We also see that since 2001, the proportion of Japan’s workforce categorized as part-time workers has increased from 38% to 44%.

Those reporting seeing an increase in salary fell from 23.7% in 1978 to 6.2% in 2005, while those who found their jobs to be meaningful fell from 30.5% to 16.6% over the same time.

For those workers who are lucky enough to be on salaried status, this summer’s average bonus will be down on the average for the first time in six years, though the decline is only 0.08% to 909,519 yen. In the food industry, however, bonuses are projected to fall 5.38% to 781,057 yen. This might give something of a clue as to how food companies are managing to avoid passing on the full costs of increased production directly to consumers in the form of higher prices.

Bonuses appear to be split right along the manufacturing line. Those working at manufacturing firms will see an average 0.2% rise in their bonus, to 932,782 yen. On the other hand, those working at non-manufacturing firms will see an average 1.51% fall, to 840,098 yen.

The ministry also said that merit-based wage systems are contributing to an erosion in worker satisfaction, as they are often being used by firms as a cost-cutting measure. The ministry would like to see more transparent evaluation systems as well as the limiting of merit-based pay systems to those sectors in which it helps to increase worker satisfaction.

The government is also planning to push small and medium sized firms into adopting corporate pension plans. Currently, some 32,826 firms make use of the government’s qualified pension plan. Most of them are small and medium sized enterprises. The plan is set to be abolished in 2012.

Meanwhile, more trouble has been found at the ironically-named staffing company Goodwill Group. According to the Yomiuri, the firm booked 1 billion yen in hush money as an expense when making a 3 billion yen retirement payoff to the president of Crystal, a company it acquired in 2006.

Japanese government considering reforms to temporary employment laws

The Japanese government is currently discussing a bill that would prohibit temporary staff companies from dispatching day laborers, as well as require firms to tell workers about the commissions that are deducted from their wages. Of course, a cap on those commissions is not being considered (and I agree with this), but given what we saw happening at temp firms such as Goodwill, it’s obvious that more transparency is needed in this realm.

The Asahi has done a writeup on this proposed law in English at their website. However, what originally caught my eye was a post entitled simply “Temp workers” by Roy Berman over at the Mutantfrog Travelogue. Roy’s post gives a clear insight to the plight of Japan’s temporary, part-time and contract workers.

Since 1986, the trend has clearly been to relax labor laws in order to allow firms to hire more and more of their workforce as non-salaried workers. In 2004, the trend seemed to have peaked as the government allowed even positions in the manufacturing industry to be filled with temporary workers on contracts up to three years. Reversing this trend will not be easy, but trying to do so might gain some populist support for certain politicians in an forthcoming election cycle that promises to bring social issues to the forefront.

Some firms following McDonald’s Japan in paying overtime to shop managers

Back on May 24, we wondered if the Tokyo District Court’s decision to order McDonald’s to pay out just over 7.5 million yen in back overtime pay to its shop managers would lead to a trend throughout the services industry. It seems as though one is evolving. A couple of weeks ago, the Nikkei reported that convenience store giant Seven Eleven has begun paying overtime to 500 managers at stores that it operates directly, while menswear outlets Yofuku Aoyama and Aoki are both paying overtime to shop managers as of May 2008.

According to the Nikkei, however, restaurant managers in general will still have it tough. 68% of firms polled said they intend to continue classifying their shop managers as company management, which means they will be exempt from having to pay them overtime.

What effect might all this have on profits? A year’s worth of overtime for shop managers at Yofuku Aoyama is estimated to set the firm back 600 million yen.

Toyota, McDonalds to pay for overtime work: Will a trend develop?

Back in January, McDonald’s Japan was ordered by the Tokyo District Court to pay just over 7.5 million yen in overtime pay to a store manager. McDonald’s had argued that store managers were not entitled to overtime pay, as they were in managerial positions. Not surprisingly, the court rejected such a notion in its decision.

The case seems to have made McDonald’s worried about its PR more so than legal issues, as the firm announced earlier this week that it will begin paying overtime to its store managers. At the same time, Toyota has announced that it will begin paying for ‘voluntary’ overtime conducted during off-hours kaizen sessions.

Will such moves give these firms - especially McDonald’s - a leg up on the competition in terms of attractiveness as employers? Will we see a bump in average wages? Will other companies begin to announce that they will pay overtime in order to improve their PR messages? Imagine: “Work here! We’ll even pay you for it!”

Although it remains to be seen if announcing that a firm will pay for overtime work will catch on as a trend, it seems safe to bet that we haven’t heard the last of this.

Japan General Estate to provide management with allowances for eating and drinking sessions with subordinates

While we learned yesterday that increased bonuses in January helped push average salaries up 1.0% against a year ago, today we’ve received news of one firm in Japan that is taking a decidedly unique approach in its attempt to promote better communication in the workplace.

Condominium marketer Japan General Estate announced today that it will “attempt to smoothen communication with subordinates” by providing a monthly “Subordinate Allowance” ranging from 100,000 to 300,000 yen per month to members of its management team. Those who oversee 20 or more subordinates will be eligible for the 300,000 yen allowance.

What is the money to be used for? According to the press release, funds may be used for eating, drinking, weddings, funerals and so on. That comes out to 15,000 yen per month for an employee at a division with exactly twenty people. If they stick to the cheap spots, and manage to not drag things off to karaoke until 2am, this could subsidize a weekly drinking party for such a department. Read more

Strong bonuses push wages up 1% in January

The Ministry of Health, Labour and Welfare released its January Labor Survey today, and there was good news for the nation’s workers, and hopefully for domestic spending, as wages were reported to have been up 1% compared against the same month a year ago, rising to 280,550 yen on average.

1% may not seem like much, but this is the highest monthly increase we’ve seen since June 2006. Higher bonuses drove the wage figures up, with bonuses increasing 12.1% against last year. Excluding bonuses and overtime, wages increased 0.6%, which was the third straight month that they have risen.

Essentially, regular wages, which exclude bonuses and overtime, fell to 248,569 yen, overtime pay rose to 19,359 yen, and bonuses and other teate rose to 12,622 yen.

Those with long memories may recall that bonuses fell over 20% in January 2007, which meant it wasn’t too difficult for them to get pushed higher this January, especially after they fell in both November and December.

Should we be optimistic about wages? For all of 2007, we saw wages fall 0.7%, which means there is still some ground to be made up for. A recently published piece in the Nikkei was pessimistic on wages, stating:

The shrinking population and a decline in staff loyalty, however, now pose a new challenge for employers, which are faced with the tricky job of curbing rises in their paychecks while keeping workers enthusiastic.

Yet, if firms want to keep good people, they are eventually going to learn that not much else makes workers as enthusiastic as receiving a nice pay packet. With courts clamping down on firms that don’t pay overtime (including Toyota and McDonald’s), skittish employers are bound to be a bit more honest in doling out the extra pay. But will they continue to be generous with the overtime itself?

We have to see data for a few more months before deciding that the wage situation is truly improving. With firms struggling to meet higher costs, a continued increase in wages sounds as if it’s going to be a challenge. If wage increases are set to be dependent on better bonuses, we’re not yet going to feel optimistic at all.

Interestingly, workers at real estate firms were hit the hardest, taking a 5.4% pay cut on average in January. This seems fitting; while being led around Tokyo this weekend on a search for a new office space, I could not help but notice the degree to which the realtor’s shoes were worn through. Perhaps he could move into the mining industry, where workers saw their average wage shoot up 7.4% in January.

Goverment plans subsidies for firms to switch part-timers to full-time status

During the middle of last week, the National Police Agency announced that the number of part-time gangsters was greater than the number of full-timers for the second straight year, and we also learned that the Ministry of Health, Labor and Welfare has been brewing up a plan to entice more firms to switch members of the part-time workforce to full-time status.

The growing number of part-time workers is something that worries the government quite a bit, as it should. Since 1990, the proportion of Japan’s workforce that is classified as working part-time has increased from 20 percent to 33 percent. Of course, there are social reasons why this shift worries the government, but there are also budgetary reasons.

Quite simply, part-time workers are less likely to be enrolled in the nation’s heath care and pension schemes. With Japan’s demographics as they are, and the government’s share of pension contributions set to increase in the next couple of years, the government would like to see as many people in full-time, pension-paying positions as soon as possible.

The problem? Full-timers can be expensive. When a full-time employee is enrolled in the national health and pension system, that employee must pay half of his or her premiums and contributions, while the company pays the other half. For an employee on an average salary, this would cost both the employee and the company about 25,000-30,000 yen per month.

The government’s proposed plan seems set up to fail from the beginning. The Ministry of Health, Labor and Welfare is apparently seeking 500 million yen in fiscal 2008 in order to use as subsidies for small and medium-sized firms (defined as companies with 300 or fewer employees) that decide to participate in its scheme.

Here’s the deal: If a company decides to participate, it will receive 350,000 yen total for the first two employees who become full-time workers. After that, the government will pay 100,000 yen for each employee, up to a maximum of ten people.

Let’s assume that the average company participating in this program switches five employees from part-time to full-time status. This would mean that such firms would be receiving 650,000 yen from the government, which averages out to 130,000 yen per worker. With the government seeking 500 million yen for the subsidy this year, about 3,850 of Japan’s just over 17 million part-time workers could be switched to full-time status.

What about the company? If they receive 650,000 yen from the government, that will cover almost 22 months of pension and health insurance premiums. In other words, after being in the program for five months, small and medium size firms will be losing money by taking the government subsidy. Read more

December household spending up 2.2 percent, household income down 2.7 percent

After Japan’s average household spending fell 0.6% in November and energy and food prices continued to rise, most forecasters had predicted that December’s figures would show lower growth, or perhaps slide back into negative territory. However, contrary to such expectations, December’s household spending figures showed a rise of 2.2% from the previous year, reaching 351,667 yen, according to data released by the Statistics Bureau.

At the same time, household income took a hit in December, slipping 2.7 percent, as the income of household heads declined 2.0 percent. At the same time, income from bonuses fell 1.1 percent and disposable income was 3.6 percent lower than a year ago. These figures leave little room to be optimistic for January’s spending figures.

We have to admit that these numbers initially seemed surprising, as we suspected growth in household spending would be restrained by belt-tightening as the winter truly hit. We know that average wages showed a 0.1% uptick in November, but that hardly seems like enough to have caused a spending spree. So what did households increase their spending on in December? Here’s a breakdown: Read more

Average wages showed slight rise in November: Ministry of Health, Labor and Welfare

On Friday, the Ministry of Health, Labor and Welfare released its labor survey for November 2007. From the data, we see that cash earnings in that month stood at 290,302 yen on average, up 0.1% from a year before. This is the second of eleven reported months in 2007 that have seen an increase in wage. The only other month to see an increase was August.

Although the increase in wages may seem like a good thing, we see that the real wage index was actually down 0.5% in November. It’s important to notice that the 0.1% increase in wages came on the back of an average 1.4% increase in the number of hours worked in November (at 156 hours). The media inexplicably failed to pick up on this second statistic.

Real good news, however, comes from the fact that the number of regular employees (正社員) increased by 2.2% in November. At the same time, however, we do still see growth in the market for part-timers, as their ranks expanded 5.2% while the number of full-timers increased 1.0%. Read more

Japanese firms in China hoping to retain talent better in 2008

This quote appeared in the December 31 edition of the Nikkei in a piece entitled Japan Firms Eye Changes To Keep China Workers On Longer:

Until now, Japanese companies in China have provided workers few opportunities for pay raises, except when being promoted to management. As a result, Japanese companies have become less popular places to work than their European and U.S. counterparts with operations in China.

By introducing Western-style structures to reward employees for their capabilities and performance, the Japanese companies aim to encourage talented personnel to stay.

Hopefully their reputations aren’t already damaged beyond the point of “no return for at least a few years.” I also think the quote should stand on its own, without too much comment from us; it pretty much speaks for itself. It will also be interesting to see what kind of follow-up information we get on this issue in the coming months…

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