
Japan’s labor market is tight, and higher wages may be needed to retain workers - SirLJ
https://www.bloomberg.com/view/articles/2017-08-02/japan-inc-may-finally-have-to-fatten-paychecks
======
patio11
Partly this is a recognition that Japan Inc. has historically awarded a
blended compensation package which includes salary, benefits similar to most
first-world countries, and a host of non-pecuniary terms which are not broadly
enjoyed across all W-2 employees in the US. ("Expectation of lifetime
employment" is a biggie; there are substantially more subtle terms, too, like
"We're going to _take care of you_ , and we sincerely mean that, and you trust
us to sincerely mean that. This will manifest itself in behaviors which
American companies would describe as quixotic to irrational to outright
disturbing[+].")

The non-pecuniary terms have been weakening in recent years but salaries have
not been increasing at anything approaching parity. The non-pecuniary terms
_are not small_ relative to the total notional compensation package.

One reason that Japanese companies are having difficulty hiring folks is that
their candidates have marked-to-market the non-pecuniary terms. There is a
totally defensible reason to value Toyota's standard offer as of 1975 at being
worth an integer multiple of the salary part of the package. It is very, very
difficult to make the case that a traditionally managed Japanese company's
non-pecuniary terms are presently worth $50~$100k per year given that one will
be taking advantage of them in 2017 to 2062 as opposed to 1975 to 2020.

[+] One of my first conversations with a boss at a traditionally managed
Japanese company involved my expected timeline to get married and what the
company's role in that process would be; my boss assumed that it would be
sourcing the bride.

~~~
akg_67
I actually know several instances of how company expects employees to
sacrifice everything for the wellbeing of company and how company takes care
of employees for life.

One example, during 2008 crisis, the company my friend was working for 20+
years already, was in trouble and didn't pay employees for almost a year. My
friend continued to work for the company despite it being bankrupt and him not
getting paid for so long.

Once company turnaround completed and came out of bankruptcy, owners not only
made unpaid employees whole but has done much more for the employees that
stuck around during bad times.

The loyalty runs both ways.

~~~
Sholmesy
Nice anecdote, and I'm glad your friend was made whole (and then some), but
this is crazy. I wonder how many times the same scenario has played out, and
the company continued to spiral into bankruptcy. Separating emotion from $$$
is important for this exact reason. He owes the company nothing. Maybe I'm
being overly cynical though...

------
dcw303
The problem is Japan has been in a deflationary environment for so long that
they've forgotten how to bump up a price and turned into a nation of misers.

I've witnessed first hand the collective hysteria when an ice cream company
raised their prices by 10 yen[0] and also had to put up with coworkers banging
on in excitement whenever 7-11 has an Onigiri sale dropping from 110 to 100
yen. Not to mention the queues stretching around the block when Yoshinoya cuts
a buck and a half off their beef bowls.

My anecdotal evidence, based on looking in shop windows, is there's plenty of
part time (arubaito) jobs on offer; the problem is young people are too smart
to take them up on their pitiful 700 yen per hour offers, which in Tokyo
barely cover your transport and lunch costs. And yet the businesses will
continue to weep and wail and gnash their teeth because they can't find
anyone. It's not rocket science.

[0] [https://qz.com/656080/a-japanese-ice-cream-maker-deeply-
apol...](https://qz.com/656080/a-japanese-ice-cream-maker-deeply-apologizes-
for-raising-prices-by-9-cents/)

~~~
delhanty
>coworkers banging on in excitement whenever 7-11 has an Onigiri sale dropping
from 110 to 100 yen

Usually it's an up to 150 yen onigiri for 100 yen, so of course they're going
to get excited.

Edit: It looks like it is/was an up to 160 yen onigiri for 100 yen! That's a
37.5% discount! [1]

[1] [http://seven-eleven-mania-blog.jp/gohankei/5617/](http://seven-eleven-
mania-blog.jp/gohankei/5617/)

~~~
timr
It's still pretty silly, considering the absolute value of the savings.

My personal favorite along these lines is the way that a single building might
have 2-3 floors of the same kind of restaurant (say, yakitori), but the one
place that is 5 yen cheaper per item will have a line out the door, while the
others are half-empty.

~~~
FussyZeus
Is this a cultural thing? I've never been to Japan so I'm kind of flying blind
here but I'd assign that 5 yen as a convenience cost and happily pay that
price to avoid the long line. I have a hard time thinking the Japanese people
place no value on their time whatsoever...

~~~
sharemywin
walmart(lines to get in line) vs. Kroger(generally pretty fast) vs. giant
eagle(empty walk right up and pay).

------
adventured
Japan's primary problem on income is that the economic ground they've lost in
the last 20 years is vast. In the late 1980s, their GDP per capita was beyond
that of the US. Now it needs to climb 50% to catch up. The last 20 years has
taken them back to #16 among major economies in terms of GDP per capita. That
gives you an idea of how difficult it's going to be for Japan to bring their
incomes back in line with high per capita output economies like the US (or
Australia, Denmark, Sweden, etc).

They need very substantial, sustained economic growth for a decade or more to
start regaining lost ground. Their debt problems will continue to put pressure
on the Yen, the debasement of which is a big culprit in the sizable drop in
their standard of living over the last decade. While their interest costs are
eating up such a large portion of their budget, their ability to properly
invest into growth is heavily restricted. They're stuck between a rock and a
hard place. I've yet to see a plan for how they're going to deal with that. To
make matters worse, their savings rate has dropped to low single digits, as
their standard of living has dropped they've been forced to reduce savings to
try to maintain (which has further pressured the government's ability to
properly fund itself, as they can no longer count on tapping into large new
pools of savings via debt issuance, leading to abusing the Yen as a last
resort).

~~~
nihonde
Lots of childless old-timers are sitting on hundreds of thousands to millions
of dollars in liquid assets that presumably will revert to the state.
Household savings in the 60+ demographic are exemplary. Of course, that's part
of the reason the economy is stagnant.

~~~
ShabbosGoy
Keynes vs. Hayek in a nutshell.

------
ekianjo
Running out of people? Most large corporations in Japan have WAY too much
staff doing about nothing productive all day long. This is due to the long
standing tradition that started in the 70s to keep hiring most university
graduates well before they graduate in April every single year, even though
there is no such need for hiring (kind of social contract between the Japanese
government and the large corporations). If anything less workforce will be a
blessing, they will have to finally focus on what REALLY matters.

~~~
1_2__4
This makes no sense to me. Why wouldn't the companies expand their output if
they have idle workers? I feel like you described 1/10th of the issue and it's
up to the reader to fill in the rest?

~~~
s73ver
You still have to sell that output. And until you do, you have to store that
output. And if you can't sell that output, then you have to get rid of it in a
fire sale.

------
0xbear
Yeah, I do get contacted by Japanese recruiters, and their comp in my field is
pretty laughable by US standards. That said, the same applies to all of Europe
as well. People literally seem to be making one third of what they'd be making
in the US if they were any good.

~~~
wolfgke
The metric that you have to consider is

salary - taxes - costs of living [including health insurance] + expected
future revenues [in particular pensions]

Can you provide me evidence that, say, Germany, is so much worse than the USA
with respect to this metric?

~~~
richardknop
Germany is much worse in this metric compared to UK. I am specifically talking
about London.

I get contacted by recruiters from Germany (and other EU countries) quite
often and they could never match London contractor pay even remotely.

Germany also has higher taxes and health care coverage is comparable in UK and
Germany (both have national healthcare).

I think that's a microcosm of US vs EU salary situation in software
engineering. IT job market in London is very different from any place in
Europe, I'm not sure why that is.

~~~
wolfgke
> I am specifically talking about London.

The living costs in London are enormous. A fellow student has a highly payed
analyst job at Goldman Sachs in London, but still does room sharing in a flat
somewhere in London.

~~~
richardknop
I know living costs are "enormous". But if you make 3 times more money as
you'd do in Berlin, it's still a much better deal.

The point I was making even in top cities in Germany (Munich for example)
where living costs are also enormous, salaries are not very competitive
compared to SF/NY or London (this only applies to contracting, permanent
salaries are low in London).

~~~
wst_
So be fair and compare to the contractor salary in Tokyo as well. I can assure
you that, despite being lower, salaries are quite close to London ones. A 3
time difference is a myth. Unless you are going to compare London engineers to
Tokyo combini part time worker.

~~~
richardknop
Yes I meant contractor salary is 3x more than permanent salary for a very
senior software engineer in Germany for example. The idea behind this
comparison is that you don't really have contractor market in Germany being so
active as in London.

In London contractor market is very active and large so you can go from
contract to contract basically without gaps and function basically as if you
had a perm job but with much higher salary.

In Germany contracts are more sparse and I don't think it's easy to pull off a
full time contracting there. The rates are also quite a bit lower (at least
from emails I get from time to time about contracts in Netherlands & Germany)
so there's that as well.

And of course, Tokyo is much much worse in this respect. I know some people
who live in Tokyo so I know that being a programmer there is pretty bad.

~~~
wolfgke
> In Germany contracts are more sparse and I don't think it's easy to pull off
> a full time contracting there. The rates are also quite a bit lower (at
> least from emails I get from time to time about contracts in Netherlands &
> Germany) so there's that as well.

A rule of thumb in Germany: If you earn double the amount as a contractor as
you would as an employee this is about the same standard of living. In other
words: If you don't really earn _a lot more_ as a contractor than as an
employee, it is not worth the hazzle.

Another problem for contracting are the laws concerning Scheinselbständigkeit
(fictitious self-employment) - cf.
[https://de.wikipedia.org/wiki/Scheinselbst%C3%A4ndigkeit](https://de.wikipedia.org/wiki/Scheinselbst%C3%A4ndigkeit)
\- which make it really difficult for companies to contract someone for a
longer time.

~~~
richardknop
Yes there have been changes like that in UK as well (IR35) aimed at making it
difficult for companies to keep hiring contractors for a longer time.

First problem with that was that public sector IT in the UK depends on
contractors so they have shot themselves in the foot (already many public
agencies started relaxing the rules and working around IR35 to be able to hire
anybody).

Also most contractors usually change contract every 6-12 months so it's not a
problem. You don't work at a single company for longer than that (1 year 11
months is maximum, after that you get in trouble because of IR35).

> A rule of thumb in Germany: If you earn double the amount as a contractor as
> you would as an employee this is about the same standard of living

Well what if it is 3 or 4 or even 5 times more. With top market contracts the
rates can be really good. If a company urgently needs to hire somebody skilled
to come in and do some firefighting you can negotiate a very high daily rate
for 6 months contract.

Also keep in mind you pay lower taxes as contractor as most of your income is
via dividends. And you can also expense a lot of things you buy if it can be
justified as cost of running business.

------
raleighm
True that Japanese companies should pay more. For what it's worth, it doesn't
appear to have started. Nikkei ran a story today noting that summer bonuses
(which are a thing) are down for the time in five years.

------
beep_beep
Fun fact, the Phillips curve for Japan sure looks a lot like Japan:
[http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1083...](http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1083.pdf)

See also the wage inflation/unemployment relationship.
[https://www.boj.or.jp/en/research/wps_rev/lab/lab14e02.htm/](https://www.boj.or.jp/en/research/wps_rev/lab/lab14e02.htm/)

------
PhasmaFelis
> _At the same time, baby boomers are approaching retirement_

It wouldn't have occurred to me that Japan had a baby boom. I suppose soldiers
returning home in despair or in triumph are all looking for comfort and
stability.

~~~
TazeTSchnitzel
The last century of Japanese history looks a lot like that of the Western
developed nations. (Probably because Japan made itself into a Western-style
empire, then got involved in WW2 big time with the Western powers, then got a
Western-style American occupation, so…)

~~~
PhasmaFelis
I guess I'd always assumed that the Baby Boom was the result of a _victorious_
end to war, but the other makes sense too.

Was there a baby boom after WWI, or the American Civil War, or other wars that
siphoned off a major part of a country's young men?

~~~
emodendroket
Japan may have been the loser, but it also had a big postwar economic boom. To
me this seems like the more obvious cause.

~~~
TazeTSchnitzel
The Allied Powers had seemingly learned the lessons of Versailles and didn't
try to punish the losers (well, not as much), instead letting them grow. Thus
why them not being victorious didn't matter, I guess.

~~~
yequalsx
America did try to punish the Germans. Millions starved as a result of
deliberate Allied policy. It wasn't until the schism with the USSR that
policies shifted. Eisenhower in particular wanted Germany to be an agrarian
society.

~~~
Qub3d
Wait, i'm confused. I've always been told America poured tons of money into
Germany via the Marshall Plan [0], which resulted in the
"Wirtschaftswunder"[+] of the 50s and 60s. Former president Hoover went over
and surveyed Germany almost directly after the war, in 1947.

[0]:[https://web.archive.org/web/20090419195002/http://www.un.org...](https://web.archive.org/web/20090419195002/http://www.un.org/Pubs/chronicle/2008/webarticles/080103_marshallplan.html)

[+]: Literally "economic miracle"

~~~
sgift
Long story short: This wasn't the original plan. The original plan, which was
in effect for a while, was a variant of the "Morgenthau plan" (
[https://en.wikipedia.org/wiki/Morgenthau_Plan#JCS_1067](https://en.wikipedia.org/wiki/Morgenthau_Plan#JCS_1067)
). It took two years for them to realize that not only would they be starving
Germans (intention), but also the rest of Europe (unintended), and more or
less block any economic growth in Europe (+risk Europe falling under the sway
of the Soviet Union). So, they reversed their plans and the rest is history
(that history includes the Marshall plan).

------
Mikeb85
Who'd have thought limiting the labour pool would drive up wages?

------
SirLJ
Just remember in the end of the 80s and the begging of the 90s, Japan was on
the verge to become the world most powerful economy and market crash after
that... 25+ years later the market is still almost in half - so many
retirement money lost and a great example why buy and hold for a long time is
actually not a good retirement strategy...

~~~
rpazyaquian
What does that mean for things like Vanguard's retirement fund strategy? Isn't
that based entirely on long-term improvement in the market?

~~~
SirLJ
It means that all those robo fintech companies and the Vanguards of the world
are making a lot of money, but "buy and hope" is not a good retirement
strategy for the little guy, especially if you are close to retirement and you
have some money set aside and count on them to live off...

------
mathattack
Japan has one of the lowest birthrates in the world. This is inevitable as
demand from the elderly outpaces young people to fulfill it.

~~~
onion2k
Presumably though, as tax revenue falls due to citizens retiring, that will
lead to more privatization of services as the government won't have the money
to buy them, and a consequential push towards automation as service providers
try to lower costs. If automation happens quickly enough it's not outside the
realms of possibility that Japan's aging population could lead to _fewer_ jobs
in some sectors.

~~~
mathattack
This is a lot of automation. :-) When you have 1.46 births per Mom [0] you are
effectively automating a quarter of the jobs. On the surface this seems
achievable, but generally automation winds up creating new needs. (The advent
of tractors meant farmers were more productive, and other jobs wound up
absorbing hte workers)

[0]
[https://www.google.com/search?q=japanese+birth+rate&rlz=1C5C...](https://www.google.com/search?q=japanese+birth+rate&rlz=1C5CHFA_enUS568US569&oq=japanese+birth+rate&aqs=chrome.0.0l6.2328j0j1&sourceid=chrome&ie=UTF-8)

------
mcappleton
The fundamental problem is that the Japanese population is shrinking. The only
real solution is more babies or at least really good robots.

