Millions of workers are taking home their smallest share of corporate income in two decades as companies build record cash hoards and fail to give the substantial wage raises that Prime Minister Shinzo Abe sees as critical to a durable economic recovery.
A seasonally adjusted estimate by the independent NLI Research Institute found that worker compensation fell as a percentage of corporate income in 2014 to the lowest level since 1991.
Companies piled up ¥332 trillion in internal reserves by the end of the year after making record profits but increased the number of low-paid, nonregular jobs to curb fixed personnel costs.
Take-home pay as a share of company income has declined since 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 through June last year, according to Cabinet Office calculations 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.
Labor unionists are seeking much higher salary increases this year as they meet with their employers during the shunto 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.
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