what about wages? Economist University Professor Former Bank of Japan Executive Opinion [Column]

The movement of rising prices of products familiar to our lives is unstoppable.

However, the level of wages has not caught up with the rise in prices, and the burden of living is only increasing.

On the other hand, Rengo has set a policy of calling for a wage increase of about 5% in next year's spring labor offensive, and Keidanren has shown its willingness to encourage companies to raise wages.

Everyone is worried about wage movements, what will happen in the future?

This time, we will talk about the future of wages based on interviews with 25 experts in the NHK special "What will happen to Japan due to the depreciation of the yen? I'll look into it.

(Economics Department reporter Neil Kato and his NHK special coverage group)

Wage hikes cannot keep up with the sharp rise in prices

What does it mean when wages do not keep up with price increases?

First, let's take a look at recent wage trends.

The graph below is the "Monthly Labor Statistics Survey" conducted by the Ministry of Health, Labor and Welfare for more than 30,000 business establishments nationwide.

It's one of the stats that economists watch the most right now.

Looking at the graph of "real wages" that reflects price increases, the latest preliminary figure for September was down 1.3% from the same month of the previous year.

Negative for 6 consecutive months.

The total amount of cash earnings per worker, including base salary and overtime pay, is 275,787 yen.

Although it increased by 2.1% compared to the same month last year, we can see that wages have not kept up with the recent price increase of over 3%.

Will wages rise? What are the experts' predictions?

What will happen to wages?

From late October to mid-November, our interview team asked a total of 25 people, including economists and analysts at financial institutions and think tanks, university professors, and former executives of the Bank of Japan, about their outlook for wage increases.

Of these, only one answered that wages would rise faster than the current pace of inflation.

22 respondents answered “2.Prices will rise, although they will not reach the current level.”

And "both 1 and 2 are possible" is one.

On the other hand, there was one person who “did not rise”.

Most experts expected wages to rise, but they do not think it will be enough to outpace price increases.

What is the reason?

Some experts cited the fact that only a small number of companies with good business performance are able to raise wages sufficiently, and that it is difficult for small and medium-sized enterprises to raise wages significantly.

Nana Otsuki, Pictet Japan:

“I think the level of the spring labor offensive for large companies will generally match the inflation rate, but this is mainly for large companies with foreign demand, and other companies will be greatly damaged by the weak yen. It will not be easy to reach that point.”

Some also point out the weakness of the growth potential of the Japanese economy.

Mr. Takahide Kiuchi of Nomura Research Institute

"The wage increase rate will exceed this year's price increase, but it will be only for one year next year. Low wages are not a distribution problem, but a growth problem. The potential of the Japanese economy. Wages won't go up if you don't increase your power."

What do you need to do to get a raise?

So what should be done to raise wages?

Many of the experts gave keywords such as "employment mobility" and "investment in people."

Many industries in Japan are suffering from labor shortages, but if there is a smooth flow of human resources to shift to growth fields, it will be possible to encourage wage increases and increase the growth potential of the Japanese economy.

Mr. Izuru Kato, Totan Research

“By activating job changes in the employment market, we need a trend that will increase the number of companies that can provide salaries and human resources who can receive good salaries in the economy as a whole. To do that, we need unemployment insurance like in the Nordic countries. It is necessary to create a safety net, such as by increasing the number of employees, and provide support so that they can increase their specialization at universities and vocational schools.By doing so, employment will also move to growth fields that are more suited to the times.

” Some experts say that this will be a chance for the Japanese economy to break out of the so-called "lost 30 years."

Hideo Hayakawa, former governor of the Bank of Japan , said,

"In the deflationary mindset of the past nearly 30 years, companies did not undertake large-scale restructuring, but they did not raise wages or make investments. They did not take risks and lost their proactive stance. This is a shrinking equilibrium. If business owners change their stance toward raising wages and making capital investments amid rising prices, it will be an opportunity for the Japanese economy as well.”

Keiichiro Kobayashi, Professor at Keio University,

“Japanese companies have been avoiding wage increases and aggressive investment because the domestic market is shrinking and they are worried about their own growth. Japan has been stuck in a vicious cycle where income has not increased and the market has shrunk.For the past 30 years, Japan has continued to maintain a zero interest rate policy, and has continued to be in a lukewarm state in which companies can be managed without taking risks. As a result, we have been postponing responses to issues such as the declining birthrate and aging population, social security, and fiscal sustainability.We must confront these issues and change our pessimism about the future.”

summary

Will the economy continue to stagnate if wage increases cannot catch up with price increases?

Is it possible to seize the opportunity for reform by creating a flow of wage increases to create a positive cycle?

Future wage increases will serve as a touchstone for predicting whether the Japanese economy will be able to grow sustainably.

attention schedule

Next week's focus will be on the US employment statistics, which will be released on the evening of the 2nd in Japan time.

The Fed, the central bank of the United States, has continued to tighten monetary policy at an unprecedented pace to keep record inflation in check, but there is growing concern about an economic slowdown.

Under such circumstances, how will the Fed judge the extent of the rate hike at its December meeting?

Employment statistics are attracting attention among market players in determining this.