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Business trends

Japanese companies dangle fatter paychecks in race for young talent

Uniqlo, Yahoo Japan and others try new hiring tactics as labor pool dwindles

Japan's young workers are finding themselves in a seller's market. 

TOKYO -- First-time employees in Japan are earning more as companies compete to hire from a shrinking labor pool, breaking with a tradition in which younger workers accepted lower compensation in exchange for job security.

Fast Retailing, which runs the Uniqlo casual apparel chain, will raise entry-level pay for incoming college graduates to 255,000 yen ($2,288) a month from 210,000 yen in spring of next year for positions that involve location transfers. The change will affect a few hundred of the roughly 650 new recruits expected to be signed on that year. There are also plans to revise compensation for new graduates employed this spring.

Difficulty landing talented workers is forcing companies to increase pay. Fast Retailing introduced an intern program in 2016 in which college students spent a week at Uniqlo stores in China, the U.S. and elsewhere outside Japan.

The program, designed to discover potential leaders, has consistently attracted far more promising applicants than there are slots available. However, "there are not many students who join the company," said a Fast Retailing executive.

Fast Retailing needs all the young talent it can get to support its rapid overseas expansion. But it is believed that many of those individuals end up choosing to work for major trading conglomerates or foreign-owned businesses.

Trading houses Mitsubishi Corp., Mitsui & Co., and Sumitomo Corp. pay this year's recruits 255,000 yen a month. To compete, Fast Retailing lifted its compensation to the same level.

A wide range of companies from condiment maker Kewpie to furniture retailer Nitori Holdings are raising initial monthly salaries. The 2018 class of college graduates received an average of 206,700 yen from their new employers, government statistics show. That is up 9,300 yen from 2010 when the job market cooled off following the global economic crisis.

Now that young workers find themselves in a seller's market, companies that offer less attractive compensation are left at a hiring disadvantage.

Other companies are shedding the old seniority system and paying new recruits according to their abilities. Chat provider Line initiated a special screening process to select engineers who possess advanced technical skills. Those that pass will be offered a starting annual salary of at least 7 million yen next spring, up from roughly 6 million yen this year. Both numbers exceed the 5.28 million yen minimum paid to engineers hired under the normal process.

Yahoo Japan created a hiring process for so-called "engineer specialists," a category that includes web service developers and other coders. Starting salaries begin at 6.5 million yen, or about 50% higher than the pay offered to undergraduate degree holders. However, engineer specialists can be between 18 and 30 in age, as long as they developed an app that drew 1 million downloads, among other conditions.

Ashita-Team, a Tokyo startup that provides a cloud-based employee evaluation system, is introducing this month a five-tier grading scheme for new recruits based on previous internship performance and other criteria. Newly hired employees will be paid between 280,000 yen to 330,000 yen a month depending on where they stand in the rankings.

"The more talented the young worker, the stronger the demand to be assessed fairly," said Ashita-Team.

A Tokyo employment placement startup, Nextbeat, got rid of its uniform entry-level salary this year and opted for scales between 4.2 million yen and 8.4 million yen. The initial salary is determined by qualifications, skill sets and one's performance during an internship.

"Students who are choosing startups are increasing in number, but we believed that a more attractive system was necessary," said a Nextbeat representative.

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