Japan is struggling to figure out how to raise wages. Economist's Olivier Blanchard and Adam Posen think that Japan should increase nominal wages, along with other benefits, by 5-10% "by fiat." However, since 1995, overall wages have only increased by 0.3%. Japan's prime minister has been working on increasing wages. He was able to increase minimum wages, and they will increase again on October 1st. However, these increases have been very small and have only affected a small portion of the workforce.
Japan's shrinking population is getting older, so the costs of pensions and medical care are large--1/3 the increases in wage are absorbed by social-security payments. The article states that it is odd that it is so hard to increase wages because of the tightening of the labor market and the population.
"One reason is that some industries that need to raise wages are unable
to. Public nurseries, for example, are desperately short of staff yet
cannot increase pay because of government rules."
"...Inequities, and the
divide between traditional, regular “salarymen” jobs and non-regular
workers, distort the labour market. Regular workers are more willing to
trade higher wages for job security."
http://www.economist.com/news/finance-and-economics/21707221-raising-japanese-wages-harder-it-looks-behind-pay-wall
A lot of Japanese females stop working once they get married, and probably will not look for a job in the future. That is not the main but could be one of the reason why there is not enough people are trying to be employed. But a lot of places do use AI to replace actual labor, when people do go look for job the payment will be lower than expected.
ReplyDeleteReading up on Japan's wage cuts I believe that the shrinking population is not the only factor prompting Japanese wage cuts. Companies like Toshiba, Nissan, Toyota, Panasonic, and other Japanese business giants have seen a decrease in profits. Turnover this year has not been as substantial as last year. What's the solution? Companies reason wage cuts or firing employees. Rather than having an aggressive business approach companies are forced to be conservative. Wages were expected to increase two folds, but this year has been a disappointment. A lot of Japan's economic growth is dependent on China's development and growth. During last year's fiscal year Japan's largest automotive conglomerate, Toyota, 13.2% net income increase versus this year's expected 4.4% is an indication of Japan's downturn. “Companies and workers alike seem to look backward rather than forward in setting their expectations” for price inflation, wrote Luc Everaert and Giovanni Ganelli, officials of the International Monetary Fund in a blog post reports Bloomberg.com.
ReplyDeletehttp://www.bloomberg.com/news/articles/2016-03-16/japan-inc-slashes-wage-increases-as-abe-fails-to-boost-economy
I agree that the problem is both the shrinking population and the fact that much of their economy is tied to the currently struggling Chinese economy. Japan's population pyramid is shifting to look almost like a upside-down triangle because of the large elderly population. Just like the U.S., their labor force participation rate is decreasing.
ReplyDeleteI also agree that Japan's dependency on the chinese economy is a big factor causing Japan wage cuts. However, i believe the shrinking of the actual labor force in the country is having a greater effect on the Japanese wages as it increases the medical care costs and also makes it hard to increase wages through the shrinking labor market.
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