Corporate Attitudes toward Wage Trends in FY2010

Some 30% of companies expect to improve wages in fiscal 2010, but they will still be at low level for 2nd straight year.

While concerns about employment and income are growing in the Japanese economy due to the global recession after the bankruptcy of Lehman Brothers, public attention is focusing on efforts to increase wages such as increasing base salaries and bonuses, as well as securing enough jobs for workers. In addition, an equally important issue is whether personal spending can support the economy through, for example, the government's direct support measures for households.

TEIKOKU DATABANK conducted a survey on companies' attitudes toward wages in fiscal 2010.

*This is the fifth survey on wage trends, following surveys conducted in January 2006, January 2007, January 2008 and January 2009.

Only 31.8% of corporations expect wage improvement in fiscal 2010.

When asked about wage trends in fiscal 2010, the number of companies that said a wage improvement for permanent employees (e.g., raises in basic pay, bonus and lump sum) "will be implemented/can be expected" was 3,388 out of 10,651 firms. Its percentage distribution was 31.8%, increasing 3.9 points compared with forecasts for fiscal 2009 (27.9%). In the meantime, 4,315 corporations answered that a wage improvement "will not be implemented/cannot be expected," accounting for 40.5%, suggesting that the corporate wages environment would likely remain very tough.

 

In detail, a raise in basic pay accounted for 27.2%, while an increase in bonus/lump sum for 16.6%.

Looking at the specifics of the wage improvement plan for permanent employees in fiscal 2010, "a raise in basic pay" accounted for 27.2% of the total (or 2,900 out of 10,651 firms), and "an increase in bonus/lump sum" made up 16.6% (or 1,772 firms). These ratios increased from the previous survey (fiscal 2009) by 2.0 points and 4.0 points, respectively. In addition, 10.5% of the companies already plan to reduce wages in fiscal 2010, suggesting that they may inevitably cancel a regular wage increase and cut bonuses.

Wage Improvement for Permanent Employees

Note 1: Population parameter: companies made valid responses (forecasts for fiscal 2006: 9,903 firms, results in fiscal 2006 and forecasts for fiscal 2007: 9,529, results in fiscal 2007 and forecasts for fiscal 2008: 10,049, results in fiscal 2008 and forecasts for fiscal 2009: 10,822, and results in fiscal 2009 and forecasts for fiscal 2010: 10,651)

Details about Wage Improvement

Note 1: Population parameter: companies that made valid responses (fiscal 2007: 9,529 firms, fiscal 2008: 10,049 firms, fiscal 2009: 10,822 firms, and fiscal 2010: 10,651 firms)

More than half aim to secure a workforce, accounting for the largest share of reasons for a wage increase; nearly 80% will not raise wages because of weak performance

When asked about the reason for the wage increase (multiple answers allowed), 1,785 companies, accounting for 52.7% of the 3,388 companies that said they expected to raise wages, said they aimed to secure a workforce, also accounting for the largest share of the answers, down 5.8 points from the 58.5% in the previous survey.
Meanwhile, 3,372 companies, accounting for 78.1% of the 4,315 companies that said they would not raise wages, said they would not do so because of their poor business performance, up 1.3 points from the 76.8% in the previous survey.

Reasons for Implementation of Wage Improvement

Note 1: Followed by "To respond to revision of minimum wage" (5.1%, 174 firms), "To respond to improvement in wages of non-permanent employees" (1.8%, 60 firms), " Other" (7.1%, 242 firms), and "Don't know" (2.1%, 70 firms)
Note 2: Forecasts for fiscal 2008: surveyed in January 2008, forecasts for fiscal 2009: surveyed in January 2009, and forecasts for fiscal 2010: surveyed in January 2010
Note 3: Population parameter: companies responded that wage improvement "will be implemented/can be expected." (fiscal 2008: 4,520 firms, fiscal 2009: 3,018 firms, and fiscal 2010: 3,388 firms)

Reasons for No Wage Improvement

Note 1: Followed by "Considering introduction of the work-sharing system"(4.9%, 211 firms), "To strengthen capital spending" (2.3%, 98 firms), "Labor cost increased due to reemployment of baby-boomers" (2.3%, 98 firms), "Reduce wages of permanent employees to respond to decrease in wages of non-permanent employees" (1.5%, 65 firms), "Reduce wages of permanent employees to respond to increase in wages of non-permanent employees" (0.5%, 23 firms), " Other" (2.8%, 121 firms), and "Don't know" (2.0%, 85 firms)
Note 2: Forecasts for fiscal 2008: surveyed in January 2008, forecasts for fiscal 2009: surveyed in January 2009, and forecasts for fiscal 2010: surveyed in January 2010
Note 3: Population parameter: companies responded that wage improvement "will not be implemented/cannot be expected." (fiscal 2008: 2,792 firms, fiscal 2009: 4,542 firms, and fiscal 2010: 4,315 firms)

Total of 54.3% expect no improvement in non-permanent employees' wages, while only 12.8% expect improvement, suggesting a tough wage environment.

When asked about wage trends for non-permanent workers in fiscal 2010, 1,065 companies said they will or expect to raise their wages, accounting for 12.8% of the 8,332 companies that hire non-permanent employees.
Meanwhile, 54.3% of the 8,332 companies said they will not or do not expect to raise their wages, exceeding 50% for the second consecutive year. These results highlight how tough the wage environment is, the same as last year, as companies are cutting more non-permanent jobs than permanent jobs amidst the current recession.

In response to the question about personal spending that is affected by wage trends, companies that said they "have expectation for growth" came to 195 out of 10,651 firms or 1.8% of the total. Those that answered they "worry about a reduction" made up 61.5%, exceeding 60%, down 27.0 points since the last survey (88.5%). A total of 29.6% of all companies said they expect personal spending to remain unchanged, up 23.1 points from the 6.5% in the previous survey. Thus, while more than 60% of companies are concerned about a decrease in personal consumption in fiscal 2010, the overall outlook for personal consumption improved from last year when nearly 90% expressed concern.

Forecasts for Personal Consumption in Fiscal 2010

Note 1: "Don' know" (forecasts for fiscal 2007: 8.9% (849 firms), forecasts for fiscal 2008: 6.1“ i614 firmsj, forecasts for fiscal 2009: 4.7“ i506 firmsj, and forecasts for fiscal 2010: 7.1% (755 firms)
Note 2: Population parameter: companies that made valid responses (forecasts for fiscal 2007: 9,529 firms, forecasts for fiscal 2008: 10,049 firms, forecasts for fiscal 2009: 10,822 firms, and forecasts for fiscal 2010: 10,651 firms)