Japanese workers get smaller share of corporate earnings despite record profits
[TOKYO] Millions of Japanese workers are taking home their smallest share of corporate income in two decades as companies build record cash hoards and abstain from substantial wage raises seen by Prime Minister Shinzo Abe as critical to a durable economic recovery.
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 (US$2.75 trillion) 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.
Take-home pay as a share of company income has declined since Mr Abe took office in late 2012 as profits grow while risk-averse employers resist his call to boost wages and end two long decades of deflation.
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.
Although Japan's economy emerged from recession in the last quarter of 2014, many companies are looking for signs of sustained economic growth before committing to a decision to raise salaries.
Labour unionists are seeking much higher salary increases this year as they meet with their employers during the so-called "shunto", or annual wage negotiations, this month.
Analysts warn that caution about raising wages could create a vicious cycle of shrinking domestic demand and diminished economic growth prospects.
"Unless wages are raised in a sustainable way, domestic demand and consumption will continue to languish, preventing companies from finding profit opportunities at home," said Taro Saito, director of economic research at NLI Research Institute.
REUTERS
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
International
Colombian fund managers eye US$750 million fee bonanza after senators tweak pension bill
Fed survey cites inflation, US election as key financial stability risks
Oil prices steady after Iran plays down reported Israeli attack
G7 pledges swift aid for Ukraine, seeks to calm Middle East
H5N1 strain of bird flu found in milk: WHO
China moves to boost foreign investment in domestic tech companies