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Japanese workers get smaller share of corporate earnings despite record profits

33 Comments
By Tetsushi Kajimoto

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33 Comments
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This has been the continuing trend in the US since the 60s and will be the case here unless companies are forced to distribute more of their wealth.

5 ( +8 / -3 )

This is the reality of Abenomics. Get the big companies bigger profits and more competitive through yen depreciation and beg, but not too sincerely, the corporations to up wages.

Unless wages go up and consumers have more to spend, this ain't going to work, the unfired third arrow notwithstanding.

5 ( +7 / -2 )

"This has been the continuing trend in the US since the 60s..."

It has but it really accelerated after the economic downturn and shows no hint of slowing down. Businesses have come to view their lower and middle employees as nothing more than commodities and an expense that must constantly be reduced.

7 ( +7 / -0 )

Japan takes another large step to the eventual Americanization of its employees.

No more loyalty from the big companies. No more pensions. No more raises that at least keep up with inflation.More and more jobs that are low pay and part time.

It's all so very American.

8 ( +11 / -3 )

A seasonally adjusted estimate by the independent NLI Research Institute shows worker compensation fell as a percentage of corporate income in 2014 to the lowest level since 1991. By contrast, companies piled up 332 trillion yen in internal reserves as of the end of last year on the back of record profits while increasing the number of low-paid, non-regular jobs to curb fixed personnel costs.

Just as liarsnfools says:

This is the reality of Abenomics. Get the big companies bigger profits and more competitive through yen depreciation and beg, but not too sincerely, the corporations to up wages.

And anyone who thought the LDP would put in place a policy that actually benefitted the working class was simply fooling themselves.

3 ( +7 / -4 )

Japanese companies are cheap when it comes to what they pay. Partly though it is the culture of not changing jobs, when a better deal is on offer, that is to blame.

5 ( +7 / -2 )

This has been the continuing trend in the US since the 60s and will be the case here unless companies are forced to distribute more of their wealth.

Japan takes another large step to the eventual Americanization of its employees.

Did either of you bother reading the article before you launched your predictable, and off-target anti-U.S. rant? If you had, you would have read this:

Japan ranked below the United States, Britain, France and Germany in payroll expenses as a ratio of gross domestic product as of April-June last year, according to calculations by Japan’s Cabinet Office based on OECD statistics.

Why don't you folks stop bashing the U.S. just to make yourselves feel better, and focus on the fact that Japan ain't the utopia you think it is?

4 ( +11 / -7 )

I can understand employers' concerns, but at least, they can increase the amount of bonuses. If they are NOT doing it, that would be another story.

0 ( +2 / -2 )

Want more money? Get the skills that employers are willing to pay more for. It can be as simple as swinging a baseball bat - look at Ichiro, lol.

-9 ( +1 / -10 )

Recovery will only take hold and deliver sustained economic growth if households achieving higher living standards.

Positives first, It is not all doom and gloom the average household net-adjusted disposable income per capita is a wafer over $25000 a annually, the OECD average hovers around $24000. High levels of Employment, 71% aged 15 to 64 in Japan , again above the OECD average of 65%. At 83 life expectancy is three years above the OECD average of 80. Japan world class educational system produces top performing levels in reading literacy, maths and science. However addressing gap between the richest and poorest households, the top 20% of the population earn over six times more as the bottom 20%, a considerable margin is going be a challenge.

There is mounting evidence of a link between depopulation and difficulties in balancing work and family life, manifested when drilling down housing costs, over 22% of gross adjusted disposable income is consumed in rent, gas, electricity, water, furniture, property maintenance, the single largest expenditure, a deal breaker for couples considering marriage.

Abenomics, stimulus in the form of an aggressive bond-buying campaign, has not been followed by structural reforms and whilst considerably boosting corporate earnings and stock prices, Japan loyal workforce has been shunned in what amounts to a fragrant act of shameless corporate greed and betrayal. With a further consumer Tax hike looming on the horizon in 2017, Abe San LDP government have a mandate to aggressively kick and rattle some boardroom furniture, a few 'heads' need to be seen rolling in the sand.

2 ( +2 / -0 )

About 62% of Japanese companies reported higher profits than last year. The leaders were the automakers, but as much of their product is now produced and sold overseas, the profits tend to stay overseas. A couple Japanese companies related to Apple also posted stromg profits, but these are not large-scale employers. JR has seen improving profits from the increase in tourists. Toshiba qnd Casio did well too, but their products are no longer made in Japan, the workers who see higher wages will be Chinese, Thai, and Vietnamese. 38% of Japanese companies did not see any improvement in profit, and a fair number saw an annual loss. These companies tend to be the domestic manufacturers who depend mainly on the domestic market.

We can't forget that though some companies are earning strong, or even record profits, this comes after a few years of record losses. These companiee have borrowed vast sums to keep themselves going during the recession, and this money must be repaid before anyone will start to see any increase in salary. If you are Panasonic, it would take perhaps two decades of good profits to pay off the losses of the past five years, but it looks like Panasonic is not going to earn much, if any, profit this year. Sharp will lose another $250 million, added to the $8 billion they and their creditors have lost over the past few years.

4 ( +6 / -2 )

Corporate behavior is the root cause of the sluggish growth (low domestic demand) in post 2008 and post bubble. Corporations are hogging more and more of the revenue, while pushing for laws that allow them to worsen their workers' working conditions. Meanwhile, corporate welfare is also at an all-time high.

The workers have less money to spend, so they don't spend, and thus the economy doesn't grow. The government responds with tax cuts...for the corporations! while taxing consumers higher. It's all counter-productive madness, and goes against the most basic principles of macoeconomics, not to mention common sense.

Where's Henry Ford when you need him?

2 ( +5 / -3 )

My company's sales have gone up a lot (somewhat related to the yen), and I've responded by raising bonuses to our employees and also hiring new ones.

1 ( +5 / -4 )

They could just adjust minimum wage +500yen/hour or so, and hire a bunch of people to research violations. But they will never do that as they benefit from low pay and they can control people better who have no choice but work for less.

2 ( +2 / -0 )

Only local politicians still believe that 21st century corps will act like a patriarch.

0 ( +0 / -0 )

Yes it's the corporations fault because there has been so much political stability in Japan they should just start blowing wads of their cash on their workers when they don't even know if the current prime prime minister will break the 6 month barrier add in the fact that every political party threatens labor reform for the last 20 years yet none have had the coconuts to do anything about the ridiculous system here I don't care much for the right wing nut job Abe but he at least is making headway against a bunch of backwards thinking stuck in the sixties oyagi that don't know anything else

-4 ( +2 / -6 )

80-90% of Japanese have bought into the salaryman "seishain" ethos.

These Japanese salarymen are never going to suddenly up and quit because their 6-8m yen salary isn't stretching far enough. They know they're considered the "winners" in this society, even at that moderate wage level. They also are well aware that most other jobs pay the same (give or take 10-20%), and that companies offering more do so because they are paying for a risk premium. As such, as it currently stands, the most they will do is stay where they are and push for a 3-5% raise. Meanwhile, the non-seishain's believers aspire to nothing more than to be "seishain", because they've been taught that it's the road to riches, so they're basically hopeless. Abe wants company's to throw them a bone (by making them seishain), but that discussinon is simply semantics. Seishain is often just a carrot dangled to make people work more.

The other 10-20% of the population who are less deluded by this whole salaryman system, may seek to or have already broken free. However, at the macro-level, which is what this article is about, they don't really make that big a difference.

As such, it comes down to whether the corporations will deign to give the plebians their 3-5% raise, rather than any discussion on whether the system itself should be changed.

Of course, Japan at the end of the day is not a command economy, and corporations have every right not to give that raise, especially as they know their employees are not going to go anywhere. Employees have nowhere to go. So why give them a raise? They will continue working just as hard for current levels of pay. Let some other corporation help the nation by dipping into their profits.

6 ( +7 / -1 )

Trickle-down economics at work.

This just exposes the fallacy that aiming your economic plans at companies, rather than the people, just means the companies will keep more money for themselves, leaving the people in the same spot they were in, if not worse.

3 ( +4 / -1 )

Ah. This is Abenomics at work.

The rich get richer, the poor get poorer and the middle get middler.

1 ( +2 / -1 )

"....corporations have every right not to give that raise,"

If that's the case, then the government should start scaling back its lucrative subsidies and shift more of its procurement to their foreign competitors. Oh, and it can rescind that corporate tax cut as well. It has "every right" to do so.

Meanwhile, us consumers/workers can respond by buying more Samsung TVs, Hyundai cars, etc.

1 ( +4 / -3 )

"the middle get middler"

Is that good, bad, or it doesn't matter?

0 ( +1 / -1 )

Hi descendent, a cruel, severe but undeniably factual assessment, in retrospect the same corporations can so easily withdrawn the whole salary-man "seishain" system, "winners" in this society can so easily turn into tomorrow's 'plebeians' with a lawmakers legislative sleight of hand.

2 ( +2 / -0 )

Before trickle down even begins, circumstances will be such that some pump priming at the lower end will be the only way of staving off the inevitable social unrest fomented by Abe's inflation led recovery. Visit any supermarket at opening time to dispel any lingering doubts you may have that for a sizeable and increasing proportion of the population, particularly but not only the swelling ranks of impecunious aged, "yase gaman" is increasingly the norm. Denied their fair share, and increasingly resentful of those who flaunt their financial wherewithal, something has to give.

1 ( +1 / -0 )

Corporate behavior is the root cause of the sluggish growth (low domestic demand) in post 2008 and post bubble. Corporations are hogging more and more of the revenue, while pushing for laws that allow them to worsen their workers' working conditions.

Sorry, corporate behaviour is not to blame for sluggish growth. Corporations exist to make money, and they need to spend money to make money, your corner ramen shop owner knows this much. Corporations invest nearly every penny in profit they earn, as their goal is always growth. Your typical businessman, be he a one-man operation, or the president of a corporation, knows much more than your typical lying politician, or never-never land academic.

If you look at the balance sheets of corporations over the past few years, you can break down what is going on quite easily. If you look closely, you will see that most companies have seen very little increase in sales or growth. You will see that executives are not being paid more now than they were six years ago. The only thing profitable companies share in common is that they pay more in tax than they do in payroll.

Next you will say that companies are sitting on record amounts of cash, and this is correct. But it is correct only because the money supply in America has increased by 140% since 2008. Banks have borrowed this money at low interest from the central bank, and in turn, companies have issued debt to borrow this money in order to buy stocks in the stock market. The amount of money companies are sitting on is unchanged relative to the amount if money in circulation, and the situation in Japan is not much different. If you subtract the "earnings" made on the stock market (which were funded by borrowed money), these companies' financial outlooks look far less rosey.

-4 ( +2 / -6 )

Those of us without our heads in the sand saw this coming when "Abenomics" was first announced to the public. It was never going to be even slightly beneficial for the average Joe. Japan is on a one-way trip back to the 50s. Hold on tight, everyone!

1 ( +2 / -1 )

oyatoi: I've seen first-hand the observations you make, but I disagree that social unrest is "inevitable", merely because the Japanese poor are simply too meek and apathetic. They resent the better off, yes, but don't mistake that with any sense of injustice about unfair access to opportunity. I view this resentment as more akin to petty jealousy, rather than any serious unrest. Almost all of those people in the discount supermarket lineup at 8am would jump at the chance to chain themselves to a "coveted" seishain position anywhere, while I would imagine very few have any serious thoughts about protesting about their circumstances in any way.

0 ( +1 / -1 )

I would like to ask this? does Japan have a trade union where employees can go with complaints against the company? and if they do whey don't the unions stand up for the workers??

2 ( +2 / -0 )

As Japan is becoming more like America, we are becoming more like Japan in the rise of huge corporations which are in league with government/organized crime.

1 ( +1 / -0 )

Did you bother to read the title of this article, jerseyboy?

Japanese workers get smaller share of corporate earnings despite record profits

As for your assumption of what we think Japan is, remember what they say about assumptions.

From articles published here on Japan Today, we have read about the increase of part time jobs, the lack of raises keeping up with inflation and tax increases and even the "black" companies.

The comparison to American companies was made because the situation is exactly the same: workers get smaller share of corporate earnings despite record profits

0 ( +0 / -0 )

Serrano,

"the middle get middler"

Is that good, bad, or it doesn't matter?

What I meant was that the middle class get thinner - fewer in number. The higher income bracket makes its money from investments and skimming a little cash off a large number of people. Morally or not, it creates its own income. The lower income bracket has little in the bank and creates its income with day to day toil. The middle class, on the other hand, relies heavily on what it has in the bank, lives in mortgaged housing and is paying of loans. It has a fixed income and is the most vulnerable to inflation, companies suddenly going bust and so on.

Abenomics is making more money for corporate businesses by skimming even more off the middle class. Not by creating more income. The middle class is therefore thinning out and slowly dropping off into the lower income bracket.

As to whether that is good, bad or indifferent, I leave that to you to decide.

-2 ( +0 / -2 )

Some of my income flows result in being on 'a zero hours contract' - I don't see ever see a bonus nor do I have to do any overtime.I wouldn't have it any other way though...........

0 ( +0 / -0 )

My last full-time job was a 40 hr./wk gig, but the company through the use of an in-house dispatch company (close partnership), didn’t have to legally pay any health or pension insurance. Naturally, no employment insurance was offered. As a result, I paid for the public versions out of my own pocket. When contract renewal came up, I was commended for my efforts (from 0 to 50 students in a year and growing), but told that the owner of the company I was dispatched to had the money but didn’t want to give me any more. They even refused to pay the standard of living increase guaranteed in the original contract (1 – 3%).

Economically, I don’t know how long I can stay married under these conditions; the last “offer” I got was $500 lower than what I made 20 years ago. Of course, this is also happening to a large segment of the Japanese population. Coincidentally, about half of the workers in that 12-person office were working by the hour; all were women. As mentioned in the article, Japan isn’t the only nation contributing to the dissolution of its tax base and the destruction of the family. Regulation and enforcement are needed. Raising corporate taxes (preventing them from being passed on to consumers) and instituting fair market competition (as opposed to the price fixing that goes on) would also be steps in the right direction.

0 ( +1 / -1 )

Only people who can "afford" to own stocks of companies are rewarded by capital gains and shareholder buy backs. It's a shameful and sad situation also happening in US. The vicious cycle continues as companies hoard their cash and spend on M & A or stock buybacks and don't reward workers. They don't care as long as their making money for stockholders. Worse in US because the CEOs command insane paychecks. Hope the Japanese CEOs have more morals than the American counterparts.

0 ( +0 / -0 )

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