Will the wage-hike trend spread?
―An overall increase in labor productivity and appropriate price pass-through are essential―

Amid historically high prices, momentum is building for wage increases. Ahead of this year's shunto spring wage negotiations, one large corporation after another has announced aggressive wage increases, but the question is whether this wage-hike trend will spread to encompass firms of all sizes in all industries.

For the time being, rates of wage increases at small and medium enterprises (SMEs) are expected to lag behind those at large corporations. This is because the gap in earning power between large corporations and SMEs has widened further since the COVID pandemic, mainly due to the weak yen and high resource prices, as well as differences between them in terms of leeway to increase labor’s share of income.

By industry, the non-manufacturing sector is likely to see lower rates of wage increases than the manufacturing sector. This is down to many non-manufacturing industries being labor-intensive, so labor costs constitute a greater burden for them compared to the manufacturing sector, and also because the earnings of non-manufacturing companies hit hard by the COVID pandemic are still recovering.

If wages at large corporations rise following this year’s shunto, pressure to increase pay will gradually spread to SMEs, which are suffering even more serious labor shortages than large corporations. For SMEs to secure sufficient resources to raise wages, 1) they must work on digitalization to catch up with the labor productivity of large corporations, and 2) improvements must be made in the effectiveness of the “Declaration of Partnership Building” scheme, which commits participating companies to strive to make business transactions fairer, so that they can appropriately pass on higher costs, including personnel expenses.

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