Japan In The News: Wage Cuts Supports Jobs

A recent Bloomberg article titled Japan Eases Recession Pain as Wage Cuts Support Jobs describes how Japan’s unemployment rate has remained relatively low amid the worse recession since World War II.

Japan’s unemployment rate is around 4.4% compared to 8.5% in the US.  In addition to cutting temporary staff (which does not count under the jobless rate), companies are cutting wages (and working hours) for full-time employees.  Also, Japan still has a tradition of lifetime employment which gives companies few choices.

According to the article, “what makes Japan different is the flexibility of its wage system … with the exception of Japan, average nominal pay in 25 advanced economies has risen virtually every year for almost two decades — even during recessions, OECD (Organization for Economic Cooperation and Development) data show.  By contrast, Japanese salaries have fallen in seven of the last 10 years”.

Salaryman 

There are obviously some pros and cons with this wage system.  In the US, it looks like some automotive companies and other factories are shutting down or have shut down their plants for an extended period to cut cost (wages).

4 thoughts on “Japan In The News: Wage Cuts Supports Jobs

  1. Cool article! I’m an Econ major at OU and foreign policies are always interesting. I guess my question is if wages get cut across the board wouldn’t that be removing competitive wages and thereby allowing people to steal more qualified labor from the hurting corporation? Does Japan have laws that protect against Job poaching?

    • Thanks for visiting my blog and leaving a comment.

      I have only been here working in Japan (on assignment) for about 1.5 years so I am not expert on Japanese labor laws and job poaching.

      My short experience is that employees are very loyal to their company, with lifetime employment with no layoffs being common practice. Not many workers move from company to company unlike in North America.

  2. One lesson we can all learn from Japan to tackle recession!

    Incidentally there is an interesting website that is specifically dedicated to recession victims.It offers help and discusses all issues related to recession. It’s worth a visit!

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