A gap in pay and working conditions between temporary and permanent employees is preventing a tightening job market from pushing up overall wages and inflation, the Bank of Japan said.
Wages for temporary workers are "clearly on the rise" as companies struggle to lure employees, with the job market having tightened to levels not seen since Japan's asset-inflated bubble era in the early 1990s, the BOJ said.
But permanent workers' pay remains stagnant because labor unions representing these employees, who enjoy better benefits than those on the temporary roll, tend to prioritize job security over higher pay, it said. Japan's pay scale, where salaries rise according to seniority, also discourages job hopping and prevents a tight job market from pushing up overall wages, the central bank said. The slow growth in permanent workers' income, which makes up nearly 70 percent of total wage-earners' income, partly explains why wage growth is subdued despite a strong economy, it said.
"Companies are taking various steps to address a shortage of labor," such as introducing robots to automate operations and cutting back on extra services, the BOJ said. Restaurant chain operators like Royal Holdings, which used to open their outlets 24 hours, are shortening opening hours due to a paucity of staff. Such efforts will raise labor productivity.
Wages for temporary workers are "clearly on the rise" as companies struggle to lure employees, with the job market having tightened to levels not seen since Japan's asset-inflated bubble era in the early 1990s, the BOJ said.
But permanent workers' pay remains stagnant because labor unions representing these employees, who enjoy better benefits than those on the temporary roll, tend to prioritize job security over higher pay, it said. Japan's pay scale, where salaries rise according to seniority, also discourages job hopping and prevents a tight job market from pushing up overall wages, the central bank said. The slow growth in permanent workers' income, which makes up nearly 70 percent of total wage-earners' income, partly explains why wage growth is subdued despite a strong economy, it said.
"Companies are taking various steps to address a shortage of labor," such as introducing robots to automate operations and cutting back on extra services, the BOJ said. Restaurant chain operators like Royal Holdings, which used to open their outlets 24 hours, are shortening opening hours due to a paucity of staff. Such efforts will raise labor productivity.
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