Labor crunch pushes many businesses to reform

So, if I read this article correctly, Za Watami would rather close 60 profitable shops instead of offering a decent wage to its workers. If they paid better, maybe they wouldn't have such huge turnover. Most of the college students I teach work at the shops mentioned in the article, and the reason the companies hire them, is that they can pay low wages, since they are only students! That to me is one of the biggest problems here in Japan. Public servants get a kings ransom, and the others are paid peanuts.

Labor crunch, really? I go through the Hello Work listings and I see many IT jobs only paying 50-60% of what you would get in Canada/U.S. I also still see a lot of age restrictions, 35 or younger, some even asking 28 or younger. In an aging society with a labor crunch, how can employers still offer wages that are well below other developed countries while refusing anyone above 35 year old? I am sure many companies are still OVER-staffed by the oji-san who do nothing all day. Labor crunch yeah, if you're less than 35 and willing to work for 1000 yen an hour, you're in demand.

if you're less than 35 and willing to work for 1000 yen an hour, you're in demand.

such demand is in my area as well but offering just 830 Yen/hr. (!)

Japanese corporate managers have lost sight of their basic responsibility to employees and customers. Instead of pursuing investments that sustain long-term growth, the main goal of many is a fast buck to satisfy stockholders, along with fat salaries and bonuses for themselves.

So those who banged on for higher pay for the low skilled can now see the result of what happens when it becomes un economical to pay higher wages, Watami is throwing in the towel costing many there low paid job.

In Japan, I'd need a hanko, official photograph (to absurdly strict regulations), detailed work history (hand-written) and to go through the proper recruiter. Then sit there in a room full of other applicants, in a three-piece suit in the early summer. To put it bluntly, that's crazy!

That sounds just as bad as it does when we try to hire an MLC (Japanese employee on the US bases). You have to go through a long process of announcing the recruitment opening, then when applicants fill out forms they must go through all that you list, but we have the added "luxury" of someone in HRO deciding which applications to send, even though they really have no idea of what to look for only to make sure that the application package was done properly. If a well qualified candidate forgot to sign or leave a space blank, the application is rejected. If you ask to see all of the applications, you get the usualshrug from HRO saying how difficult it would be to provide it to you. Never mind that once you go through that hurdle, and select someone, they have to wait at least 4 more months while a "background" check was done. We have had applicants loose interest because of the long waits.

Along with pay reforms, a whole scale reform needs to be done in the Japanese business process. Yes it worked in the past, but times are completely different now. Japan needs to catch up.

Japan is in for a very rude wake-up call on the economy. A rapidly aging and shrinking labor force, mounting public debt and outdated labor models are the real culprit here. Japan has probably needed labor reform for many decades now, and then traditional Japanese (manual, paperwork) process of applying for a job frankly has little place in a digital era.

In Korea, I could apply for a job through major companies on the internet. In Japan, I'd need a hanko, official photograph (to absurdly strict regulations), detailed work history (hand-written) and to go through the proper recruiter. Then sit there in a room full of other applicants, in a three-piece suit in the early summer. To put it bluntly, that's crazy!

It's with a heavy heart that I leave Japan next month, but I have to join other educated IT professionals in leaving Japan, in what BusinessWeek called "the land of the falling wage". Japan lags behind many other Asia Pacific markets right now in terms of wage growth. Japan might better be called the land of the setting sun.

The Japan Today article was talking about Uniqlo and Don Quijote, it wasn't talking about IT workers leaving Japan.

The IT industry in Japan is expansive and has its own dynamic separate from Uniqlo and Don Quijote. I'm in IT and I know for a fact that there are many opportunities in my part of the industry (finance), for people with the right experience, timing, temperament and language skills. Furthermore, from what I know of my industry, IT in Japan is paid a premium over Singapore and HK jobs of similar level. I would venture a guess Japan IT jobs are much better paid that South Korea's by orders of magnitudes. There are legion of Indian, Chinese and Southeast Asian IT engineers trying to crack the Japan IT market.

Increases wages, you'll find more local people willing to work and for overseas when you pay less than minimum wage compared to other countries why would anyone want to work here

Furthermore, from what I know of my industry, IT in Japan is paid a premium over Singapore and HK jobs of similar level

I think this site has an article about SK firms paying Japanese engineers more and the J-companies accusing them of stealing secrets. The Hays 2014 Salary Report also seems to show that Singapore & HK have a lot more wage growth at the moment than Japan.

So those who banged on for higher pay for the low skilled can now see the result of what happens when it becomes un economical to pay higher wages, Watami is throwing in the towel costing many there low paid job.

Japanese firms, the major ones, are sitting on billions of yen in reserves that are doing nothing parked in zero interest accounts. Paying employees a higher wage is one very reasonable alternative for use of those funds, after all they come about due to the productive work on the employees anyway. And if this happens more broadly people have more money to spend on going out and on other products. This is what Abe is encouraging now.

Corporate layoffs come about due to horrible management. Right wingers love to blame the victims, the employees, because they are frankly deluded and cannot place blame where it belongs. On management.

All readers back on topic please.

Wage growth is a % increase and wages are a ¥ amount.

Setting aside taxes and cost of living, at what percent South Korean wage growth am I willing to settle for a 5 Million Yen South Korea salary versus a 10 Million Yen Japan salary with about 2% expected salary increase yearly?

You can plug in specific cases' figures but that's the kind of trade off you'll be looking at.

My guess is real labor reforms will be necessary if Japan wants to attract foreign talent. Eventually people will just opt to go for wherever they can have the best lifestyle. The thing is the oyaji sitting on their fat stacks and bank accounts just are the tip of the iceberg.

The old men in the government need to do something about the cronyism and start pushing some reforms. Otherwise I doubt the labor crunch will end anytime soon.

So, if I read this article correctly, Za Watami would rather close 60 profitable shops instead of offering a decent wage to its workers.

I think what some employees fail to realize is that your employer is not simply trying to make a profit. They are in fact trying to make a higher profit than they could get by investing their money in other less risky ways. You have to keep in mind that a basic return on your money is almost guaranteed with cetain types of investments (Realestate, bonds etc.) so the business opportunity must not only be profitable, but must be more profitable than what you can otherwise get.

If wages rise even slightly, some of these marginal businesses will find that it is not rational to stay open even if they are still profitable. I'm not at all saying that I am against raising wages, I'm just pointing this out since it may not be obvious to some.

IT industry was never the topic, Uniqlo and Don Quijote was.

Employers always complaint that they could not find suitable staffs. A matter a facts is that they are not looking for suitable staffs but looking for people who are prepared to work for next to nothing. Secondly, they never gave the graduate the opportunity to gain some work experience. Many companies only interested in experience workers. Ask yourself this question, how did those experience workers got they experience in the first place. What the kids needed is the opportunity not intimidations. Thirdly, you are either too qualified or underqualified to do the job. If the person prepared to do the job, for god sake give them a chance. This would give people some hopes and confident to kick-start a new career.

I agree with StormR.

MarkX,

So, if I read this article correctly, Za Watami would rather close 60 profitable shops instead of offering a decent wage

Well the article says they are 60 (or 10%) of their "less profitable" shops. Watami is also said to operate on a "low-wage, low-margin model".

If that's their model, raising wages would hit their margins, maybe turning those shops into loss makers. I doubt any fair person would expect Watami to keep operating shops that are losing money as some kind of charity. Closing down shops that aren't operating profitably is just a part of running a business in a free market economy.

I had a cheap job when I was a student. I didn't care that - I wasn't planning to work there for that wage my entire life, but the opportunity to gain some initial experience and have something to put on my resume helped me get my next job, for a better wage. And so on.

I know a few people that OPT for the NEET lifestyle just because it's easier and possibly more lucrative than working a baito. Doing freelance work or temporary work can sadly be more fiscally effective than working for 800 yen an hour. It's compounded by the issue that a lot of places expect service overtime from their "part-time managerial" staff. The Great Japanese Overtime Swindle is probably a better name than saabisu zangyou.

zurcronium has raised the most pertinent issue in this thread: Japanese companies are sitting on billions in cash.

The government cannot mandate that these corporates pay them out in the form of higher salaries. At most, the government can mandate higher minimum wages, but most of these jobs are already paying above minimum wage so the only impact is to throttle employment at the lower end of the spectrum.

What the Japanese government needs to do is to promote changing jobs and, more especially, entrepreneurship. In other countries corporates need to pay competitive salaries or people will move jobs or strike out on their own. Japanese are increasingly changing jobs every 2-3 years with an expectation of 1M JPY salary increase, but very few Japanese still strike out to build their own companies.

As most of the job growth and salary growth worldwide come from young companies, I think this is the ultimate reason why Japanese companies' pay increases are stagnant.

It's only a labor crunch because the government has created a situation where employers can't just hire and offer a decent wage and workers can't freely move around. The comments about offering John r wages isn't the problem it is the costs the government creates if the job becomes full-time or a higher wage. Politicians everywhere can't just get out of the way, they are always skimming off the top of labor and this is the problem. Same thing is going on in America and Europe. Politicians greed for money and power in the way of people working and employers paying Good money for that work.

Japan is burning its wick at both ends, the decline most of us can see looks set to pick up speed.

Japan could be soooo much more but its collective head in the sand is killing this place.

If your young & thinking of coming to Japan you need to seriously re-think your plans, this place is going down & the pace is quickening, it is truly painful to watch this up close & personal here & the powers that be for the most part are utterly clueless or just trot out the shoganai & go back to paper shuffling on their desks!

@Todd Topolski

Actually, the reasons for Japan's labor crunch are very different from the US and Europe case.

Japan's labor crunch are due to 2 factors: Worsening Japanese demographics and Japanese' shunning 3K work (Kiken, Kitanai, Kitsui, or Dangerous, Dirty and Hard/Heavy jobs). The same dynamics are evident in the difficulty Japan's nuclear energy industry is having recruiting workers: However much the industry increases wages there just aren't enough people interested and these people have better non 3K options. Japan has no large pool of unemployed waiting to join the labor pool for just marginally higher wages. Japanese housewives are a different topic ), however (income tax exemption policy.

The long term solutions to the recruiting problems of Japan's Uniqlo, Don Quijote and nuclear energy lie in some combination of kickstarting demographic improvement (either through increased fertility or more immigration) or technological innovation that would enable less people to do more work.

"the government has created a situation where employers can't just hire and offer a decent wage and workers can't freely move around."

This isn't true. Corporate profits in Japan have returned to pre-2008 levels, and companies are sitting on record piles of cash and paying record high dividends. The companies HAVE the money. The problem is they've recently adopted business models that skim more of the revenue into the pockets of senior execs and shareholders, and less to their workers.

Oh, yeah, they'd love to have more Vietnamese and other Third World people here, slaving away at 800 yen an hour with no benefits (paid for by the state instead). That's why they're braying on about "demographics" and calling for mass immigration. If anything drags down the economy for the rest of us, it's the trend toward cheap and cheaper labor.

After Don Quijote in March stopped requiring candidates to submit standard Japanese resume forms, which many find intimidating because of the detailed sections on educational background, job applications soared

I think that's a great decision. Efficiency, people, efficiency. I've never walked out of a Don Quijote and questioned whether the staff was sufficiently thorough enough in their studies of 15th century literature to help me find the light bulb aisle.

If you work in a low paid job with no future prospects then blame yourself not Abe or your employer, if you don't like the job retrain, up-skill, re-educate, use some intelligence, look for opportunity's else where, you are the only one responsible for where you are, many people who didn't like low pay or their job created their own job, made their own employment, sometimes these people are called entrepreneurs.

The entitlement generation all think it is up to some one else to give them what they want and they are entitled to have it.

Low wages are what some business need to pay to remain in business and give a few locals at least some income, when they are forced to close even those low paid workers end up with no income.

No one is forced to work low wage jobs, just remember that, there are other options if only people choose to exercise those.

I have to admire the strength and inner fortitude people exude, commuting sometimes hours each day, tied to a boring go no where job for life, earning a pittance, personally or luckily I discovered fairly early that was something I could not endure.

Let's face it, cronyism is rampant through every labour industry in Japan. That goes for double in government. The lawmakers.

Employers are only looking for "yes men / women" drones who are willing to work for peanuts in order to secure a long-term job. They are given false hope of being able to "rise through the ranks", but on the other hand, are at no risk of losing their jobs - so they become complacent.

And this herein lies the problem with Japanese society - old farts running the top, drones at the bottom, everyone comfortable in their positions of "wash, rinse repeat" - and no innovation anywhere.

There's just no way skilled workers abroad are going to flock here with employment standards stuck in the 50s. No way in the world. That especially rings true for women, who would be horrified at the rampant sexism that goes on here.

No country is by all means perfect, but Japan has so many problems in this regard I don't know where to start...

I wish all Japanese read StormR comment and have his thinking. Then they can make good salary and have time to post on Internet everyday like him.

What Japan needs is to promote, support, and encourage a more entrepreneurial culture. The years of life-long employment are over. Young people should really start looking to create start-ups, or join them.

Also, higher wages are going to be hard to pay out if the government remains committed to driving up costs. Hikes in the consumption tax have made everything from a cup of coffee to public transport much more expensive.

Printing money has devalued the yen making imports much more expensive, especially energy, raw materials, and food. The construction industry is already getting kicked in the teeth by higher prices on steel, and fuel.

Consumers won't be able to spur demand as their incomes continue to stagnate, while their costs and taxes go up. Without cuts to income taxes, the increase in the sales tax won't have the desired affect of increasing government revenue over the long term.

The Japanese government is working has an obstacle to economic growth, not a driver of prosperity. It should get off people's backs, stay out of their pockets.

such demand is in my area as well but offering just 830 Yen/hr. (!)

Closer to 700 per hour in my neck of the woods!

3rd biggest economy? Only because the population live in substandard houses working for a pittance. Required to fill out form after form just to get an interview. With the hope of being employed looking at form after form. Told its hot/ cold and what clothes to wear. Earning enough to eat but not enough to save plan or invest. Sucks being in the 3rd biggest economy in the world.

StormR: The article is about a shortage of people willing to work for the low wages on offer. As you say, no one is forced to work such jobs, and it seems like many people are doing just as you suggest and taking up other options.

The result is that the worst employers cannot get the staff they need and may go out of business. This is something I welcome. Employers will be forced to improve their working conditions or shut down. Their staff will be able to find new jobs with better employers (remember: the reason their company shut down was a labour shortage, suggesting plenty of alternative jobs exist).

StormR, while I agree that nobody should want to work in low paying jobs, the fact is that some have to, and the reason is they have no choice to go back to school and get the extra training they need. There is a huge shortage in training or retraining programs in this country, so there are a large number of kids who fall through the cracks in the rote memory test taking system, so when they graduate from high school, they have no choice but to take these low paying jobs.

This nation isn't going to wake up to reality until it's bed time. I'm not for raising the minimum wage to 1500 yen/hr as some are demanding (though I think it needs to be upped from the current rate), but something needs to be done beyond the mere lip-service that Abe offers while he prays on his knees it works.

I hope to hear of more bad companies failing. I read an alarming statistics recently in a business journal. Almost 70% of Japanese corporate entities are exempt from tax burden in some manner due to poor economic performance (granted it's pre-Abenomics). That's freaking terrifying. The real issue with cronyism is that it keeps the bad boys in biz when they would otherwise naturally fold

MarkX

StormR, while I agree that nobody should want to work in low paying jobs, the fact is that some have to, and the reason is they have no choice to go back to school and get the extra training they need. There is a huge shortage in training or retraining programs in this country, so there are a large number of kids who fall through the cracks in the rote memory test taking system, so when they graduate from high school, they have no choice but to take these low paying jobs.

So right there is an opportunity for someone enterprising to start a retraining program/school or what ever, thing is most people are just not smart enough to see or create opportunities and so fall into ahhh gee I'm stuck in this low paying job situation, lets make some nose about it but they fail to do anything else.

I am in business and have mostly always worked for myself, I would love more money too and the only way I can get it is to create situations so it will flow in more. I cant say to my clients to just pay me more because I want or think I deserve it, things don't work like that.

For the past thirty years there has been a world wide push to lover the "unit price of labor" in order to increase the rate of profit, by the pushing of "Free enterprise" zones and the reliance of low wage workers. Most of the world has a surplus of low wage workers that can compete against the higher wage workers supported by organized (crime) unions. Companies need low wage workers who do the grunt work that many in the "middle class" refuse to do, and in the case of Japan are in short supply of. There are many companies that are "bucking the trend" by raising the minimum wage paid to their grunts (peons) so that they may have a stable workforce. As Henry Ford believed in the early 1900's during the Industrial Revolution, that if you paid workers a high enough salary they would buy back what they themselves produced; the money spent by workers would came back to them in the form of profits in the circulation and turn-over of capital. Although these companies are "bucking" the trend the over-all trend is the lowering of the (Unit price of labor) wages to workers on a global scale; and no one (or two) monkey (company) don't spoil no show. In the city of New York the minimum wage has gone up to $8.00 / hour; although there are some that say that the minimum wage should be $10 /hour. When the minimum wage was lower that what it is today, the wages for skilled workers were much higher and there were fewer people living in poverty.

time to bring in the robots for work.

Scrote I am all for that, If people thought more of themselves or re tooled their skill set, became more employable or able to do better jobs then those who pay peanuts will not be able to get workers, therefore they'd be forced to pay more to get or retain the staff they need, thus increasing the average amount of salary.

But because there is an abundance of people who will work for a pittance they keep the wage low, if people don't take those low paid jobs then that would help to improve things for everyone.

If you are fat from eating at mcdonalds who do you blame ? Mcdonlads or the fat person? Same deal here blame companies for paying low wages or blame workers for accepting low paying jobs rather than upskill themselves or become creative.

Almost 70% of Japanese corporate entities are exempt from tax burden in some manner due to poor economic performance (granted it's pre-Abenomics)

gaijinheiwa,

Its been like this for DECADES, the vast MAJORITY of J-companies PAY NO INCOME TAX!!!! They foist the taxes on to their employees to pay, its one of the most disgusting aspects of Japan Inc & the govt does NOTHING about it, way way beyond criminal!

And its a big reason why Japans companies are so weak, IF there was ever real competition in the domestic economy instead of the rampant price fixing, market sharing that goes on here LOTS of companies would go under.

One of the things the govt doesn't realize is that all these parasite companies make even those that MAKE $$$ weak as well! How many times do we read where companies are pretty much FORCED to "buy" their competition, its makes the larger entity weak & when companies that make squat buy companies that are in the red that weakness just gets larger & its monstrous in Japan now.

I mean its pathetic that I pay more taxes than over 70% of J-companies as a self employed person, every year when I pay it pi$$es me off know that over 70% of J-companies aren't paying a god damned single yen!

Japan needs t let REAL competition happen & let it run its course & let all these dead beat companies DIE! They are a noose around the entire country!

"The years of life-long employment are over."

How and why did that happen? And why did the people responsible allow it to happen? Those are the questions at the heart of this issue.

Gaijinheiwa, the "70% of Japanese corporate entities are exempt from tax burden" you're talking about is a tax loss carry forward (http://www.wikinvest.com/wiki/Tax_loss_carryforward) and it's standard accounting procedure not limited to Japan. It's just a temporal distribution issue between profits, losses and taxes.

Neither is tax carry forwards related to cronyism.

While you're at it, cronyism has nothing to do with "the bad boys in biz" not folding when they "naturally" should. The real culprit is Japan's conglomerate system, where profits from one business (e.g. Sony Pictures) subsidise losses from another business (e.g. Sony TVs) so that businesses that would have folded were they stand alone entities continue to exist as zombie operations that are a drain to the conglomerate. This is the main reason why conglomerates in total have less value than their component businesses added together.

I would say it is cronyism because those same legislators throwing corporate tax breaks and market collusion around, are the same guys leaving for their amakudari positions. Japan is probably one of the most corrupt economies on Earth in this regard.

I would say it is cronyism because those same legislators throwing corporate tax breaks and market collusion around, are the same guys leaving for their amakudari positions. Japan is probably one of the most corrupt economies on Earth in this regard

BINGO! Japan is so corrupt it has made corruption an integral part of govt, regulatory authorities are often simply legal ways to TAKE $$ in the guise of being watchdogs & yes amakudari is MASSIVE in all this, the bureaucrats allow the semi-govt type things to exist & then upon retirement parachute into those desks at the back & around corners where old geezers collect huge pay cheques for reading sports newspapers & sucking air between their teeth

And meanwhile someone who wants to open an open air café or a cat café has to jump through a bunch of hoops hemorrhaging ca$h along the way to set up a simple business to fund corruption.

My guess is of you could snap your fingers & make it all disappear that costs in Japan would drop between 25-40% for goods/services

I realize this stuff goes on outside Japan BUT Japan takes the cake for institutional corruption, most Japanese cant see it as they have come to see it as the norm..............

Immigration is not the panacea here though it is part of the solution however encouraging low paid migrants from developing nations is very short term thinking and will only degrade Japans competitiveness in the long term. There are a multitude of initiative the government needs to address to get this nation truly on its feet again and it is possible if Abe girds his loins and puts Country ahead of the party. We need to increase the size of the economy through domestic stimulus programs such as accelerated depreciation on capital expenditure and lowering of corporate taxes. We need to encourage FDI, this is difficult as the Zaibatsu will be up in arms talking about giving unfair advantage to foreign companies, ahem something like what most car manufacture’s and semi-conductor companies get when they set up production plants in the US or Europe!! The Zaibatsu need to suck it up as bringing in external capital immediately increases the capital base of the economy and provides long overdue competition to Japanese companies. How many foreign construction contractors are registered in Japan....none not 1 yet construction costs have shot up 25% in the past 12 months largely due to lack of competition though the contractors talk about lack of manpower rising costs which is only one third of the cost the rest is simply lack of competition. On the thorny subject of immigration, this is remarkably easy, give Eijyuken to any investor who can bring in 1M USD and who must invest the money within 24 months, no rapid transfer of the money back home just to get a visa, no the money needs to be invested in accordance to a pre agreed business plan, if not visa is revoked and the money confiscated, however a tax break need to be given to migrants who employ more than 5 employees fulltime. Bringing in 200,000 Philipinos in every year will be a fast track to de valuing the skills base and demotivating indigenous workers, just look at the UK with British workers priced out of Jobs which are being taken by Eastern European migrants, this is just short term but the damage will be lasting.

I could go on and on here as there are many many tools which the government has at its disposal, I think Abe has the minerals to do so, certainly he has the power base right now to push radical reforms through but some of these measures need to be in the form of Executive orders else he will be mired in party politicking, let’s see...