Raise wages to resolve hiring issues, urges Japanese government

Wage increases across small organisations and firms in Japan are becoming more widespread on the back of labour shortages and price increases, according to a recent government white paper.

The 2024 White Paper on Small and Medium Enterprises, published in Japan, has shared that small and medium enterprises, which make up 70% of the productivity in the country, need to step up moves to pass on higher costs via pricing and secure sufficient funds to boost wages to achieve sustainable wage growth.

According to the white paper, which was adopted at Friday’s Cabinet meeting, 61.3% of small organisations in Japan plan to raise wages in 2024. This is concurrent with a recent Ministry of Finance survey, which shared how organisations in Japan are set to offer more generous pay raises in fiscal year 2024 from approximately 1,100 organisations nationwide, with around 70% of these organisations poised to implement pay-scale increases, reflecting a surge compared to previous years.

Multiple drivers are behind these salary adjustments, with the highest and most popular rationale cited as “raising employees’ motivation to work, improving working conditions, and preventing employees from quitting.” This was closely trailed by imperatives such as “responding to rising prices” and “securing new employees”, according to the Ministry of Finance’s survey.

READ MORE: Organisations in Japan offer more pay raises in 2024

The white paper has shared that the current labour productivity of Japan is lower than that of other members of the Organisation for Economic Cooperation and Development. This is due to labour shortages becoming more serious following the COVID-19 pandemic. However, from the recent Ministry of Finance survey, instituting wage increases may not be able to resolve labour shortages, with approximately 40% of organisations reporting facing labour issues even after offering a wage increase, according to The Japan Times.