The Longest Decline in Real Wage

Ministry of Health, Labor and Welfare (MHLW) released February’s Monthly Labor Survey (MLS), which indicated decline of real wage by minus 1.3% compared with the same month of last year. That marked decline of real wage for twenty-three consecutive months, the longest decline after 1991 when comparable survey started, tied with the record in the time of economic slump with Lehman Shock in late 2000s. It is reasonable that Prime Minister Fumio Kishida reiterates his hope to create positive cycle of price hike and wage hike.

MLS is one of the fifty-four core statistics of the government of Japan, paralleled with Indices of Industrial Production or Vital Statistics. MHLW researches contractual and special cash earnings or days and hours worked in the companies all over Japan. The survey will be used for recognizing the situation of workers and published every month.

Total cash earnings, which means nominal wage, of the covered industries in February increased by 1.8% from February 2023, amounting to ¥282,265. That was the increase for twenty-six consecutive months.

 

However, the consumer price index, used for calculating real wage, in February rose by 3.3%, exceeding the nominal wage. Real wage has been declining for a long time, which means wage hike has been overwhelmed by price hike.

 

Among the industries, “information and communications” marked 3.9% of growth, followed by “scientific research, professional and technical services” with 3.8% and “education, learning support” with 3.5%. Wage in “mining and quarrying of stone and gravel” showed significant decline of minus 8.9%. “Electricity, gas, heat supply and water” also marked decline with “real estate and goods rental and leasing.”

 

The annual wage negotiation in this spring showed significant increase of wages in large corporations, to which the government of Japan expects improvement of real wage. However, small and mid-size entrepreneurs are still not able to raise the wage of their workers, because they cannot add cost increase on the price of their products. Depreciation of Japanese yen, sticking around even after the Bank of Japan changed their negative interest rate policy in March, causes inflation of imported goods, putting negative impacts on household economy.

 

Kishida hopes his policies for supporting households, including ¥40,000 of tax reduction for each family member in June, to work for turning over current trend of real wage. But the allowances for electricity for industries and families will end at the end of May, leaving concern for cooling economy down.

 

In the press conference when FY 2024 budget passed the Diet, Kishida set his goal at achieving wage hike higher than price hike within this year. Success on this issue may affect the fortune of Kishida administration already suffering from low approval rate.

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