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Labor costs hit 16-year high as Japan pays workers more

Big companies see salaries jump 6.6% on the year

Part-time workers' hourly wages rose 2.3% in fiscal 2017, adding costs to businesses. (Photo by Takaki Kashiwabara)

TOKYO -- Personnel expenses at Japan's large corporations have grown to their highest level in 16 years as a deepening shortage of workers has forced them to increase pay for part-timers.

These costs came to 13.38 trillion yen ($121 billion) in the January-March quarter, a level not seen since the same period of 2002, according to a Finance Ministry survey on companies with capital of at least 1 billion yen. The ministry used a moving average of the last four quarters to take into account seasonal fluctuations.The tally has risen 8.3% from a low in July-September 2013, and 6.6% over the past year.

Businesses have long curbed labor costs by employing many non-regular workers like part-timers, rather than regular workers with full benefits. But hourly wages for non-regular workers have increased due to labor shortages, pushing up expenses.

Part-time workers' hourly wages climbed 2.3% to 1,116 yen on average in fiscal 2017, according to the Ministry of Health, Labor and Welfare, topping the 1,100 yen level for the first time. Non-regular workers' compensation is improving more significantly than that of regular employees.

Labor costs for a broader pool of companies including smaller businesses reached 44.26 trillion yen in the January-March period -- back to the level last seen in October-December of 2008, immediately after the collapse of Lehman Brothers.

The cost per person -- calculated by dividing the total labor costs by the number of employees and executives -- has also surged to the highest in more than 16 years.

But the the increase in worker compensation is not nearly as sharp as that of corporate earnings of late. The percentage of corporate profits distributed to workers came to 59% for businesses of all sizes -- falling below the 60% mark for the first time since the bubble economy of around 1990.

"Japanese companies remain passive about investing in people for the future," said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

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