Fewer workers, higher wages: Japan Inc feels demographic pinch
02/03/2017 06:00
* Labour costs as portion of sales at 5-yr high - Reuters
analysis
* Temporary worker pay rising, impacting profits at some
firms
* Two-thirds of SMEs say they face labour shortages - survey
* Labour shortages could lead to cost push inflation,
stagflation
By Malcolm Foster and Yoshiyuki Osada
TOKYO, March 2 (Reuters) - Ask the president of Japan's
largest daycare chain what his biggest headache is, and Kazuhiro
Ogita doesn't hesitate: workers and wage costs. Not enough of
one, too much of the other.
Unable to hire enough employees to staff its nurseries at a
time of strong demand, JP-Holdings Inc 2749.T is paying more
overtime and bringing in part-time workers to fill shifts.
That's eating into its bottom line - a trend seen across Japan's
labour intensive industries, from delivery companies to
restaurants and even the 400,000-employee strong postal system.
Average pay for temporary workers in Japan's three biggest
cities in December rose 2.1 percent from a year earlier to 1,006
yen ($8.83) per hour - a fifth monthly record. Pay for forklift
drivers jumped 13.8 percent and hotel clerks rose 4 percent.
According to Reuters' analysis of the financial results at
193 major companies, labour costs as a portion of overall sales
are at their highest level in at least five years.
This is happening even as rank-and-file workers see their
base pay flatline, despite Prime Minister Shinzo Abe urging
firms to lift wages to boost consumer spending - raising the
prospect of an economy where costs rise but growth stagnates.
For some companies, the labour crunch is forcing them to
adapt and become more productive. Manufacturers are using more
automation and robots, and construction companies and
convenience stores are hiring more foreign workers, from a
restricted pool.
These aren't options for all companies. JP-Holdings needs
qualified teachers who have passed rigorous exams in Japanese.
The resulting impact on costs has prompted the company to slash
its operating profit forecast for the year through March by a
third, to 1.05 billion yen ($9.3 million) versus 1.8 billion yen
a year earlier.
"We can't rely on robots to care for children," Ogita said.
"We have more space - we just don't have the teachers to fill
them. It's a lost business opportunity for us."
Delivery service Yamato Holdings Co 9064.T , known in Japan
for its black cat logo, is also scrambling, even while offering
higher wages.
Thanks to the internet shopping boom, Yamato's parcel volume
and sales climbed in the last nine months of the financial year
- yet higher labour costs cut operating profit for the period by
6.5 percent.
"We simply can't get adequate staffing," said Yasuo
Katayama, general secretary of the company's 60,000-member
union. "The company has said it will do something, but it hasn't
been enough. We need the management to reconsider the parcel
volume."
SHRINKING POOL
Hardest hit are small and medium-sized businesses, which
have less cash to invest. Two-thirds of companies with 100-300
employees said they are facing labour shortages, up from 59
percent a year ago, according to a survey by the Japan Chamber
of Commerce and Industry.
But even businesses like Japan Post 6178.T , the privatized
postal system, are struggling.
"You ask the head of any company these days what their No. 1
problem is, and it's labour shortage and higher (wage) costs,"
said CEO Masatsugu Nagato. "We have 400,000 employees, so this
is a huge problem for us."
Operating profit at Japan Post's postal and logistics
businesses fell by more than half to 2.1 billion yen for the
nine months through December, as labour costs and pension
changes took a bite.
And there is little to encourage optimism. Japan's
working-age population, which shrank to 75.9 million in 2015
from a peak of 87.2 million in 1995, is expected to drop to 44
million by 2060.
Foreign workers are making up some of the shortfall - last
year numbers topped 1 million for the first time. But the
government is reluctant to ease restrictions too much amid
social and political resistance, and Abe has encouraged
companies to first hire more women and older workers.
Language and qualification barriers also create obstacles.
Ogita, head of the daycare chain, knows only one foreigner who
has obtained the necessary childcare qualifications.
One positive impact from the shortage, however, could be to
narrow the pay gap between salaried and non-salaried workers -
something Abe's government has been pushing for with an "equal
time for equal pay" campaign.
Higher wages could also bring back more workers to the
workforce, but what it means for recovery and spending is far
from certain.
"In the long run, the labour shortages could cause cost-push
inflation or stagflation, in which the cost of doing business
keeps on rising, while the economy stagnates," said Masaki
Kuwahara, senior economist at Nomura Securities.
($1 = 113.4400 yen)
(Reporting by Malcolm Foster, Yoshiyuki Osada, Taiga Uranaka,
Reiko Shimizu, Izumi Nakagawa and Tetsushi Kajimoto in TOKYO and
Gaurav Dogra in BANGALORE; Editing by Clara Ferreira Marques and
Lincoln Feast)
((malcolm.foster@thomsonreuters.com;))
Keywords: JAPAN ECONOMY/LABOUR