Author: Richard Katz, Carnegie Council for Ethics In International Affairs

The issue of wages has been on Japan’s political agenda since former prime minister Shinzo Abe urged companies to raise wages to fight inflation. Prime Minister Fumio Kishida included wage hikes in his slogan of ‘new capitalism’. But the government has only applied toothless measures, such as requests by the prime minister for companies to alter their behaviour, applying temporary tax cuts for permanent wage hikes and enacting a series of weak ‘equal pay for equal work’ laws.

Japan is hardly the only rich country where price-adjusted wages have been suppressed in the last few decades, but it’s second only to crisis-wracked Greece in showing virtually no growth in labour pay over the past quarter century. For most of the past two centuries, wages in industrial countries grew over the long term at around the same rate as GDP. Then, beginning in the late 1970s, things changed.

The wage share of national income has now fallen to its lowest level in a half-century. Between 1996–2019, productivity grew at around an average of 30 per cent in 16 rich countries, including Japan, while real hourly compensation grew only 19 per cent in the typical country. In Japan, it was a negligible 3 per cent. Until recently, Japan’s workers ironically got a higher share of national income than workers elsewhere.

While economists disagree on whether policymakers can remedy the situation, the brunt of the evidence suggests...

Read Full Story: https://www.eastasiaforum.org/2022/02/01/solving-japans-wage-stagnation/