To face the pitfalls of inflation, at the request of government, Fast Retailing, Asia's largest clothing retailer and fashion brand owner Uniqlo, has decided to increase the wages of its employees by up to 40%.
In recent weeks there had been numerous appeals from Prime Minister Fumio Kishida to Japanese companies to increase i wages, remained stagnant for decades, with companies struggling to pass the higher costs on to consumers. “There are alarm bells warning that stagflation will emerge if wage growth lags price increases,” Kishida told businesses on New Year's Eve.
According to official data released in November, theeconomy of Japan contracted for the first time in a year, with a unexpected drop of 1,2% of gross domestic product in the three months ending in September. Japan's core inflation, which does not include volatile fresh food prices, rose 3,7% in November, the fastest pace since 1982.
There is an "urgent need" to increase the salary. Other companies in the same vein
Uniqlo is the latest to join other domestic companies, such as Nippon Life Insurance e Suntory Holdings, in the race to raise wages following the cost-of-living crisis that hit Japan, which led to an unprecedented increase in the prices of all commodities, from food to fuel.
- economists they expect that other companies they will follow suit, albeit on a much smaller scale, and wonder if in Japan it can create a spiral ranging from the increase in wages, to the increase in consumption and, again, to the increase in prices.
In a press release, Fast Retailing, which underlines how there is an "urgent need" to increase the salary, will start the operation next march.
The remuneration mechanism changes: no longer based on seniority, but on performance
The company also wants to make the pay system globally competitive group: while many Japanese companies rely on a seniority-based compensation structure, the company will instead evaluate employees based on their performance and ability to contribute to the business.
Following the review, the monthly salary salaries of graduates will increase from 255.000 yen (the equivalent of 1.800 euros) to 300.000 yen (2.100 euros), an increase of almost 18%, while the salaries of new store managers will increase from 290.000 yen (or 2.000 euros) to 390.000 yen (about 2.800 euros) with an increase of about 35% in the first or second year of work. “For other employees, the company plans to increase the annual salaries up to 40%”, said Fast Retailing. “In the future, the new compensation of each employee will be decided on the basis of globally aligned evaluation criteria”.
Average wages in the OECD area. Italy in the queue. Even under Japan
Concerns have also been raised that the average wage in the world's third largest economy, it remains among the lowest levels of the G7 countries. The average annual wage in Japan was $39.711 in 2021, well below the OECD average of $51.607. In Italy, according to Istat data, the average salary for an employee is around 35.000 euros.
In September Fast Retailing it had increased wages by an average of 20% for most of its part-time employees. Combined with the latest increase for full-time employees, total payroll costs will increase approximately 15 percent year-over-year, an increase the company says will be offset by increased productivity.
Before this operation, they were 20 years that the company, which operates more than 3.500 clothing stores worldwide, was not reviewing the wages of the entire group, spokesman Pei Chi Tung said.
