Thanks for another fascinating article. In general, I have to agree with your assessment, which leads to the conclusion that real wages in Japan won't rise very much in the near future.
As you suggested, it will ultimately come down to supply and demand. Even if the imbalance creates an opportunity for higher wages after another decade of demographic shifts, an influx of foreign workers willing to accept lower wages and/or the adoption of labor-saving technologies (including AI for white-collar positions), as well as the ability to outsource overseas to arbitrage labor costs, may thwart the potential for real wage gains.
Also, Japanese companies have found many ways to employ people on a part-time or temporary basis as a means of keeping wages down. I do not see this practice changing in the near to medium term, despite a concerted effort by the Japanese central government to promote full-time employment.
Anyway, thanks for your latest menu of food for thought!
The figures don't match exactly, but they're similar. The survey seems to be of all legally established corporations, not just those listed on the stockmarket. I seem to remember receiving those surveys when I had my own business here.
The "golden" combination of rising real profits and falling real wages has been achieved in most of "the west" by engineering a high rate of inflation together with keeping real wages constant with massive immigration.
Japan has had much less inflation and immigration, but the same "golden" combination has been achieved in Japan too and the reason is probably this:
* Japanese businesses often are big exporters and have to compete with businesses offshored to low wage area (many japanese businesses have done the same) or in countries where businesses have had lower costs thanks to immigration. At the same timer japanese exporters have been able to raise prices thanks to inflation in the importing countries. Therefore even without domestic inflation and immigration international trade has indirectly extended their effects into the japanese economy.
* At the same time the wages of part-timers in purely domestic sectors like wholesale and retails have risen because they are not exposed to the indirect effects of inflation and immigration in the countries japanese businesses export to. The wages of full timers in the same industries have not risen in the same way because they are not marginal employees, and are already paid more.
Given that the global labor market wage is around $1/hour and there are billions of underemployed and unemployed people in the global labor market and that most governments are eager to benefit their national businesses by letting them have access to the global labor markets within very ample limits, and that workers are powerless, I guess that the trend of the past 30-40 years will continue.
Thanks for another fascinating article. In general, I have to agree with your assessment, which leads to the conclusion that real wages in Japan won't rise very much in the near future.
As you suggested, it will ultimately come down to supply and demand. Even if the imbalance creates an opportunity for higher wages after another decade of demographic shifts, an influx of foreign workers willing to accept lower wages and/or the adoption of labor-saving technologies (including AI for white-collar positions), as well as the ability to outsource overseas to arbitrage labor costs, may thwart the potential for real wage gains.
Also, Japanese companies have found many ways to employ people on a part-time or temporary basis as a means of keeping wages down. I do not see this practice changing in the near to medium term, despite a concerted effort by the Japanese central government to promote full-time employment.
Anyway, thanks for your latest menu of food for thought!
Good article. One question, where do you get the 51% profit increase? Is that an estimate for the whole corporate sector, or listed companies only?
I got the 51% profit increase figure from the Trading Economics website: https://tradingeconomics.com/japan/corporate-profits
They've taken their figures from the Ministry of Finance. I think it's from this survey:
https://www.e-stat.go.jp/dbview?sid=0003061946
The figures don't match exactly, but they're similar. The survey seems to be of all legally established corporations, not just those listed on the stockmarket. I seem to remember receiving those surveys when I had my own business here.
Hoping they do rise! Until then I’ll need to be supplements my yen income with side projects that pay in USD.
The "golden" combination of rising real profits and falling real wages has been achieved in most of "the west" by engineering a high rate of inflation together with keeping real wages constant with massive immigration.
Japan has had much less inflation and immigration, but the same "golden" combination has been achieved in Japan too and the reason is probably this:
* Japanese businesses often are big exporters and have to compete with businesses offshored to low wage area (many japanese businesses have done the same) or in countries where businesses have had lower costs thanks to immigration. At the same timer japanese exporters have been able to raise prices thanks to inflation in the importing countries. Therefore even without domestic inflation and immigration international trade has indirectly extended their effects into the japanese economy.
* At the same time the wages of part-timers in purely domestic sectors like wholesale and retails have risen because they are not exposed to the indirect effects of inflation and immigration in the countries japanese businesses export to. The wages of full timers in the same industries have not risen in the same way because they are not marginal employees, and are already paid more.
Given that the global labor market wage is around $1/hour and there are billions of underemployed and unemployed people in the global labor market and that most governments are eager to benefit their national businesses by letting them have access to the global labor markets within very ample limits, and that workers are powerless, I guess that the trend of the past 30-40 years will continue.