Interestingly, the nonmanufacturing sector saw the most substantial increase, with 56.0% of companies raising wages, up from 28.8% the previous year. In contrast, the manufacturing sector recorded a slightly higher figure of 69.8%, up from 52.0%.
Additionally, there has been a significant increase in the
number of companies offering raises of 3% or more. This figure has increased to
37.3% from the previous year's 13.7%. When asked why they chose to increase
wages, most companies cited enhancing employee motivation, improving working
conditions, and preventing employees from leaving as their main reasons.
Furthermore, 64% of companies indicated that the increase was due to the rise
in commodity prices.
One medium-sized retailer in western Japan noted, "At a
time when fewer people are seeking sales and customer service jobs, we cannot
acquire talent unless we improve labor conditions." Clearly, improving
labor conditions is crucial for retaining and acquiring talent, especially in a
time when the labor market is incredibly competitive.
The survey targeted approximately 1,200 companies, with around
500 large-sized companies and 700 small- to medium-sized firms. It was conducted
from mid-March to mid-April. The percentage of firms that have or plan to raise
base pay in fiscal year 2023 was calculated based on approximately 1,000
companies, excluding those that did not respond to the question or were
unclear.
These pay raises come after Prime Minister Fumio Kishida called on the business community to increase wages to mitigate the financial burden on households caused by soaring prices, from food to gasoline. Consumer inflation in Japan rose to 3.0% in fiscal year 2022 through March, marking the fastest pace in 41 years, according to government data.
Companies are also facing pressure to improve labor conditions
to acquire global talent, given that wages in Japan are still relatively low
compared to other developed countries. In fact, data compiled by the
Organization for Economic Cooperation and Development (OECD) shows that Japan
has the lowest wages among the Group of Seven industrialized nations. The
average wage in Japan rose by approximately 6% in 2021 from 1990 to $39,711.
This is in sharp contrast to the United States, where wages increased by
roughly 50% during the same 1990-2021 period.
As the competition for talent intensifies, companies are
recognizing the importance of offering competitive wages and improving working
conditions to retain and attract employees. The big question is, will these
wage hikes be enough to keep up with rising prices and address the issue of low
wages in Japan compared to other developed countries? Only time will tell, but
one thing is for sure - this is a story worth following.
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