It is sometimes said that Japan is experiencing a labour shortage (or at least tightening). In such circumstances, one might expect that workers would move to better paid jobs and force employers to raise wages in response. (This is certainly what has been happening recently in the UK - one of the top news stories this morning is that basic pay growth has risen to 7.8%.) But given the anaemic pay growth in Japan, this doesn't seem to be happening there. I wonder why not? Is it because the relative lack of external labour markets prevents it? In the case of precarious workers (agency etc), is there no labour shortage in this sector that might force up wages? What is going on?
One is the rise of non-regular workers who are paid less. Also the hiring of women at lower pay whether they are non-regular or not. Pay discrimination is illegal but the law is not enforced. In the last ten years.
A second is the hiring of older workers who paid less. In the last decade, 70% of the growth in employees came from hiring workers above the age of 55, of whom two-thirds were non-regulars, many of them former regular workers who were hired back after their "retirement." This reaching out to older workers relieved much of the labor shortage problem, according to BOJ internal studies. The older workers sought more jobs as interest rates on their savings declined to near-zero and the govt cut spending on social security and health care for them.
A third factor, as you suggest,, is the lack of flexible external markets. While it's getting easier and more common for the most talented workers and younger workers to switch jobs, it's still far less common than in other countries. Just as oligopolists can charge customers higher prices, oligopsonist companies can pay heir workers less because workers have less bargaining power if they cannot easily go elsewhere in response to low pay.
Finally, the rise of imported inflation in the last few years, on top of the 2019 tax hike, cut real wages.
Thanks, Rick - that's very interesting. The second point makes me think about the issue of 'standard' retirement ages and also the age(s) from which employees (in large firms especially?) might be forced to either retire from regular worker status or accept some sort of pay cut. If regular workers are being forced into an income cut by one or both of those options, then that would presumably be significant.
Peter, that's a big issue and I'm on vacation now. So, I'll get back to you later. But the BOJ and others have had a lot of meetings studying. One issue is whether the labor shortage was really as big a deal as some statistics showed. The role of the turn to non-regulars in pushing down average wages is a very big deal. More later. Poor pay is at the heart of Japan's macroeconomic problems.
It is sometimes said that Japan is experiencing a labour shortage (or at least tightening). In such circumstances, one might expect that workers would move to better paid jobs and force employers to raise wages in response. (This is certainly what has been happening recently in the UK - one of the top news stories this morning is that basic pay growth has risen to 7.8%.) But given the anaemic pay growth in Japan, this doesn't seem to be happening there. I wonder why not? Is it because the relative lack of external labour markets prevents it? In the case of precarious workers (agency etc), is there no labour shortage in this sector that might force up wages? What is going on?
There are few different issues involved/
One is the rise of non-regular workers who are paid less. Also the hiring of women at lower pay whether they are non-regular or not. Pay discrimination is illegal but the law is not enforced. In the last ten years.
A second is the hiring of older workers who paid less. In the last decade, 70% of the growth in employees came from hiring workers above the age of 55, of whom two-thirds were non-regulars, many of them former regular workers who were hired back after their "retirement." This reaching out to older workers relieved much of the labor shortage problem, according to BOJ internal studies. The older workers sought more jobs as interest rates on their savings declined to near-zero and the govt cut spending on social security and health care for them.
A third factor, as you suggest,, is the lack of flexible external markets. While it's getting easier and more common for the most talented workers and younger workers to switch jobs, it's still far less common than in other countries. Just as oligopolists can charge customers higher prices, oligopsonist companies can pay heir workers less because workers have less bargaining power if they cannot easily go elsewhere in response to low pay.
Finally, the rise of imported inflation in the last few years, on top of the 2019 tax hike, cut real wages.
Thanks, Rick - that's very interesting. The second point makes me think about the issue of 'standard' retirement ages and also the age(s) from which employees (in large firms especially?) might be forced to either retire from regular worker status or accept some sort of pay cut. If regular workers are being forced into an income cut by one or both of those options, then that would presumably be significant.
see: https://www.eastasiaforum.org/2019/11/08/serious-flaws-in-japans-new-equal-pay-for-equal-work-law/
Peter, that's a big issue and I'm on vacation now. So, I'll get back to you later. But the BOJ and others have had a lot of meetings studying. One issue is whether the labor shortage was really as big a deal as some statistics showed. The role of the turn to non-regulars in pushing down average wages is a very big deal. More later. Poor pay is at the heart of Japan's macroeconomic problems.