Japanese Wages Slowing Economic Growth

Japan’s current leader, Shinzo Abe, has discovered that his country is falling even further into economic troubles lately, instead of rising out of them. At first, it seemed his methods of ‘Abenomics’ could work, with the stock market increasing by three fifths. However, this excitement quickly died down when overshadowed by the underwhelming numbers in consumer spending.

Japan’s current leader, Shinzo Abe, has discovered that his country is falling even further into economic troubles lately, instead of rising out of them. At first, it seemed his methods of ‘Abenomics’ could work, with the stock market increasing by three fifths. However, this excitement quickly died down when overshadowed by the underwhelming numbers in consumer spending.

However, the cause of the economic downfall in Japan may only be partially the fault of consumers, as their wages decrease at every quarter. Similarly, tax hikes could only be adding to the country’s strife. This sounds like the problems America is having because of the same type of anti-business or ignorant thinking at the top. Currently and moreover, even as the country struggles, Shinzo Abe remains neutral regarding the decision on whether to raise the national sales tax.

If Abe understood business at all he would lower taxes which would benefit his government and the Japanese economy. But it seems he is addicted to the liberal disease.

The risks threatening his ‘Abenomics’ strategy are increasing regardless of whether he chooses to endorse the tax or not. Raising taxes as the economy continues to suffer could cause it to decline even more (just see what FDR did during the depression – early 1930s – which made it the Great Depression), whereas delaying could damage investors’ confidence in Japan’s ability to recover finances.

The Labor Market and Wages

The coming decline in Japan’s population has made many companies concerned about becoming accustomed to having plenty of help but in the future there is going to be less people to fulfill those positons. Recent data released about the labor market in Japan showed that it remains extremely tight, struggling amidst the shrinking working-age population. Unemployment fell to 3.5% in August, a 17-year low, and the jobs to applicant’s ratio stayed at a two-decade high of 1.10.

Not More Jobs, Less People Looking for Work

However, even in the areas with relatively healthy jobs data, there have been signs of discord, as the number of female job seekers decreased drastically. Businesses have reduced their number of part-time positions in reaction to slowed private consumption. This means that although the overall number of people in work may have increased, the number of job seekers have actually declined, especially amongst females, contributing to the drop in the unemployment rate.

Even those individuals with jobs are struggling to get by, since wages remain painfully low. Californians know all about this. How can business raise wages with rising energy, employment, and health care costs?

Government data showed that consumer spending could continue to struggle as salary lags behind inflation. Real wages fell by 2.6% in August, and although Shinzo Abe has been working with companies to provide additional jobs and improve wages, he could be making the situation worse. By demanding higher wages, some companies are scared of hiring additional workers, and the Prime Minister may be better served considering the high taxes of Japan instead, which are impeding the ability to pay more for workers.

Abe, like Obama, just does not get it. This is the socialist mentality right in front of you. If Abe just got out of the way, the economy would do better.

The Next Steps for Japan

To turn the Japanese economy around, there may be a need to move away from cultural norms. There is a larger margin separating high-paid and low-paid workers, with the latter suffering little job security. When a worker does not know if he will have a job the next day, he will buy the bare minimum to survive, which does not improve the economy. Unfortunately, low-paid workers contribute to 36.8% of Japan’s current jobs. Japan therefore needs to do what Texas has done: lower taxes and allow the business sector to breathe freely.

Less, not more, regulations are needed.