Japan's 2020 overtime pay marks fastest fall in 11 years amid pandemic

Average overtime pay in Japan in 2020 fell 12.1% from the previous year, the sharpest drop in 11 years, as the coronavirus pandemic forced many businesses to cut their operating hours, government data showed Tuesday.

The average stood at ¥17,352 ($165) per month, the Health, Labor and Welfare Ministry said in a preliminary report that covered workplaces with at least five workers. The pace of decline was the fastest since 2009 when the global financial crisis and economic downturn caused a slide of 13.5%.

By sector, the average plunged 33.5% among livelihood services such as hair salons as well as the entertainment industry. Restaurant and hotel operators marked a 27.3% fall while manufacturers saw a 19.5% drop.

Monthly overtime hours of all workers fell 13.2% on average for 2020, also the biggest decline since a 15.0% decline in 2009.

The average total cash earnings per worker, including base and overtime pay, fell 1.2% last year to ¥318,299 on a nominal basis for the second straight year of decline.

The survey also showed that part-timers made up 31.14% of the country’s workforce last year, down 0.39 point from 2019 and the first decrease since the survey began in 1990, as the pandemic seriously damaged the service sectors, which employ many nonregular workers.

For December alone, overall wages fell for a ninth straight month, declining the most since June 2015, as employers remained fearful of the profit outlook amid a global resurgence of the coronavirus.

Labor cash earnings slid 3.2% from a year earlier, weighed down by a drop in year-end bonuses. Economists had predicted a bigger overall fall of 4.8% that would have been the worst reading since the 2009 financial crisis.

The smaller-than-expected drop follows a report showing household spending also fell less than expected in December, offering a slightly less dismal view of the spending environment for workers than had been assumed at the end of 2020.

Still, pay declines are likely to limit the extent of any rebound in consumer spending even after Japan lifts a state of emergency that is planned to cover the country’s main cities until March 7. Analysts see falling consumer spending as a key reason for the economy falling back into contraction this quarter.

So far, Japan’s companies have fired fewer workers than in many other major economies, keeping unemployment at a low rate of 2.9%, but one of the big tradeoffs has been steep cuts to bonuses. “The underlying wage trend is likely to remain weak as companies prioritize protecting jobs,” said economist Koya Miyamae at SMBC Nikko Securities Inc.