Cost of Labour Hit 16-year High as Japan Employers Pays Workers More

July 16, 20189:45 am3363 views

Recent survey conducted by Japan’s Finance Ministry suggested that personal expenses at the country’s large corporations to pay their workers’ salary have hit the highest level in the past 16 years. This phenomenon is attributed to the deepening shortage of workers has forced Japanese employers to increase pay for part-timers.

According to the study involving companies with capital of at least 1 billion yen, labour costs came to 13.38 trillion yen ($121 billion) in the January-March quarter, a level not seen since the same period of 2002. The ministry used a moving average of the last four quarters to take into account seasonal fluctuations. The record has risen 8.3 percent from a low in July-September 2013, and 6.6 percent over the past year.

As part of the efforts to curb increasing labour costs, businesses have been employing more non-regular workers such as part-timers, rather than hiring regular workers with full benefits. However, hourly wages for non-regular workers have also grown due to labour shortages, thus pushing up expenses.

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The data from Ministry of Health, Labor and Welfare noted that hourly wages for part-time staffs climbed 2.3 percent to 1,116 yen on average in fiscal 2017, topping the 1,100 yen level for the first time. Additionally, non-regular workers’ compensation is improving more significantly than that of regular employees, Nikkei Asian Review reports.

Labour costs for a broader pool of companies including smaller businesses reached 44.26 trillion yen in period, back to the level last seen in October-December of 2008, immediately after the collapse of Lehman Brothers.

The cost per person, as calculated by dividing the total labour costs by the number of employees and executives, has also surged to the highest in more than 16 years. But the increase in worker compensation is not nearly as sharp as that of corporate earnings of late. The percentage of corporate profits distributed to workers came to 59 percent for businesses of all sizes, falling below the 60 percent mark for the first time since the bubble economy of around 1990.

“Japanese companies remain passive about investing in people for the future,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

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