Japan’s labor market is tight, and higher wages may be needed to retain workers

https://www.bloomberg.com/view/articles/2017-08-02/japan-inc-may-finally-have-to-fatten-paychecks

by SirLJ • 9 years ago

120 134 9 years ago

patio113• 9 years ago

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.

PhasmaFelis3• 9 years ago

my boss assumed that it would be sourcing the bride.

Yikes.

cgarrigue• 9 years ago

The image you have is probably close to how in some societies 2 families decide their children are betrothed to each other.

The reality is closer to match making: some colleagues might introduce you to somebody who could be a match. Or maybe they will invite you to what is called a goukon, a group date where one of the male participants invite a few colleagues or friends of his who are single while his girlfriend invite the same number of female colleagues or friends of hers who are single.

dcw3032• 9 years ago

Wow. Choosing your wife for you? Who and where was this company?!

My experience with a traditionally Japanese run megacorp/zaibatsu in the heart of Tokyo is much more like a traditional western company. The minutia of HR is very Japanese and hard to get your head around, but the broad strokes of salary/bonus/non monetary benefits (I had to look up what pecuniary means) is basically the same.

ramchip• 9 years ago

I don’t think “choosing” is the right word, it’s more like providing the opportunity to meet someone with drinking events, goukon etc. At least if his company is like the ones I’ve seen.

mc32• 9 years ago

Context is a bit important. My understanding (erroneous perh) About 30% of the workforce works at the larger companies -The Mitsubishis, Toyotas, etc. Those are the ones who used to typically hire before graduation and offered the "lifetime employment". Most of the workforce work for SMBs (<300 emps) --not the prototypical salaryman employer. Not all salarymen are averse to job hopping --though at low annual percentages, still the typical worker didn't work their whole life at one co. AFAIUI.

sho3• 9 years ago

my boss assumed that it would be sourcing the bride

Are you sure you understood him correctly? That would be highly irregular, to say the least. More likely it was an offer to pay for a matching agency. Arranged marriages between specific people are pretty rare these days, and unheard of outside of family. Unless your boss literally adopted you, he would never take on that responsibility!

patio113• 9 years ago

I doubt he would phrase it the same way I did, but I am absolutely not materially misremembering the conversation in which he said, and this is a verbatim quote translated from Japanese, "[24 year old coworker], this is Patrick. He just joined, graduated from a good school in America, and has a bright future with the company. Have you ever considered an international marriage?"

fenomas3• 9 years ago

I think people are reading rather too much into the phrase "sourcing". Read it as "assumed he'd probably wind up marrying a coworker" and the boss in question is just observing the obvious - workplace marriages are quite common in Japan, especially considering that company employees around that age tend to socialize a lot within the company.

One can think of such things as non-pecuniary benefits of a job but I think you'd be hard pressed to find a boss who's ever considered it in those terms. More likely they're just acting on the "truth universally acknowledged" that young single employees must be in want of a spouse.

(Of course, the reverse of this is one of the ways Japanese companies are rough on women - if you're 23 and single people will tend to assume you're going to marry someone and quit in a few years, and treat you accordingly.)

FRex2• 9 years ago

There is this high quality[1] article/blog post I've seen before on HN in relation to software and Japan and it mentions it too: http://www.kalzumeus.com/2014/11/07/doing-business-in-japan/

The paragraph starting with the sentence "Don’t have a wife?" and the next one after it mention that practice, it's too much to copy paste in here.

[1] as in - lengthy, detailed and well written, but I can't judge the content itself.

raleighm3• 9 years ago

> sourcing the bride

To be clear, this is not at all normal in Japan either (at least not in Tokyo or Osaka or anywhere other than very small companies with septuagenarian managers). No one prices matchmaking services into compensation considerations. Agree generally with the rest.

jsemrau• 9 years ago

"Sourcing" might be a bit string, but there are company organised outings for match making

akg_67• 9 years ago

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• 9 years ago

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...

new299• 9 years ago

I find all these anecdotes interesting, but I'm not sure how much I can extrapolate from them.

I've worked in Japan, and seen the inside of a few Japanese companies. I've seen some weird stuff. I've worked in other countries too and I saw some pretty weird stuff in those companies too.

Thing is, I think there's a tendency too attribute weird things that happen in Japan to "Japanese culture" where-as sometimes it's really just a weird thing that happened...

I think that's less of a case perhaps in other countries, where you have a better understanding of the baseline culture.

I'd love to see more studies/data on what the average experience is like.

dugditches• 9 years ago

I knew people with 25+ years just gone after 2008 dip.

Most people can't afford to be 'loyal'(especially for a year~) and have bills to pay/children to feed.

I've been to several factories/shops, and that 'loyalty' is quickly eroding. As worker wages stagnate while Management's increase. Management being under the squeeze of following Gov't Regulations and Outsourcing. So both sides are under this toxic stress.

BearGoesChirp3• 9 years ago

[+] 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.

This was the example I was thinking of when reading the first part of your message. I'm glad you said it because I feared it would've been seen as an exaggeration if I added it as an example I've heard of.

So to anyone who is reading about this and doesn't trust a single anonymous source, let this second anonymous source add on that I've read about the same behavior, and even more disturbing behavior happening to unmarried female employees (where do you think they source the brides from?).

That said, I've heard about these cases at a few companies. I do not have sufficient evidence to generalize beyond that, only to point out that it does happen (and is tolerated by the legal system, no chance of that in the US), not the rate at which it happens nor if it is a fair generalization of Japanese companies in general.

nihonde4• 9 years ago

Not to trivialize real gender prejudice, but there is no shortage of Japanese women who are in a dire search for a convenient marriage to a busy man who can give her children, financial support, and otherwise leave her alone. Even among my friends, whom I consider to be highly intelligent and evolved people, this is a perfectly normal aspiration.

PhasmaFelis3• 9 years ago

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.

TazeTSchnitzel4• 9 years ago

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…)

PhasmaFelis3• 9 years ago

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?

csours• 9 years ago

There's a statistic that the US population is growing because of children of immigrants.

seanmcdirmid• 9 years ago

Almost all countries baby boomed after WW2, not just westernized ones.

raleighm3• 9 years ago

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.

dcw3032• 9 years ago

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...

delhanty• 9 years ago

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/

timr• 9 years ago

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.

ekianjo4• 9 years ago

the problem is young people are too smart to take them up on their pitiful 700 yen per hour offers,

There's a large population of chinese students in Japan who are very happy to work at such rates.

FussyZeus4• 9 years ago

There's a large population of chinese students in Japan who are very happy to work at such rates.
which in Tokyo barely cover your transport and lunch costs

Is this another of those things where paying a person an non-livable wage is going to be construed as a Good Thing™? How about we raise the prices so the people serving us the food can, you know, live?

ShabbosGoy2• 9 years ago

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.

My understanding is that the blame for this lies squarely with the Bank of Japan. The system was much more stable under the Finance Ministry.

ramphastidae• 9 years ago

Reminds me of the bizarre behavior of many co-workers who wait over an hour in line when Dunkin Donuts has free iced coffee day.

adventured• 9 years ago

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).

nihonde4• 9 years ago

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.

ShabbosGoy2• 9 years ago

Keynes vs. Hayek in a nutshell.

rpazyaquian2• 9 years ago

Sounds like where the US is headed.

ekianjo4• 9 years ago

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__42• 9 years ago

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?

s73ver2• 9 years ago

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.

0xbear2• 9 years ago

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.

wolfgke5• 9 years ago

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?

Pyxl101• 9 years ago

It's also important to factor in the ability to move later. If I earn a small amount of money in a place with low cost of living, then I can't move to a high cost of living location later. If I earn a large amount in the US in a high cost of living area, then I can still live frugally and move to a low cost of living area later.

Cost of living is fungible. If I buy a property in an expensive city, then I have to invest a lot of my money, but I can also recoup that later if I sell the property. In boom cities the property will appreciate and create more wealth. Other costs like food and transportation provide the opportunity to be significantly frugal if you desire to be. But with the high compensation available to top workers in tech, it's possible to not be frugal and still save a large amount.

richardknop6• 9 years ago

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.

literallycancer• 9 years ago

Germany has severe wage compression going on for more than a decade. Companies are making more money every year, but instead of sharing that by increasing wages or sharing equity, they invest the profits (mostly abroad).

The only reason it hasn't blown up yet is that the value of € is kept low by southern European countries that are struggling to stay afloat. Since the living costs remain relatively low, employees don't have to ask for more.

Source: recruiters trying to convince me that €60k is what senior software engineers make in Germany. If you are wondering, that leaves you with €2900/month after taxes and insurance. The wonders of progressive income tax.

0xbear2• 9 years ago

Taxes are much lower in the US too, even if you factor in the cost of health insurance. And if you are expecting "pensions", there's a bridge I'd like to sell.

6t6t6t62• 9 years ago

I don't know your field, but developers in Tokyo make (in USD) between 50k and 100k a year. This is a salary equiparable to what could be made in Europe and most parts of the US. It's even quite higher than what is paid in South Europe.

mathattack2• 9 years ago

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• 9 years ago

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.

toomuchtodo5• 9 years ago

that will lead to more privatization of services as the government won't have the money to buy them,

Governments can be funded by their central banks printing money.

and a consequential push towards automation as service providers try to lower costs.

Governments can put that same automation in place to provide services with no profit motive.

mathattack2• 9 years ago

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...

SirLJ2• 9 years ago

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...

rpazyaquian2• 9 years ago

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

SirLJ2• 9 years ago

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...

beep_beep• 9 years ago

Fun fact, the Phillips curve for Japan sure looks a lot like Japan: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1083...

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

Mikeb85• 9 years ago

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

mcappleton• 9 years ago

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

Japan’s labor market is tight, and higher wages may be needed to retain workers

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