Rising labor costs casting shadows on businesses

August 6, 2017

TOKYO- Rising labor costs are casting shadows over the management of Japanese businesses amid escalating manpower shortages in the country.

According to a labor ministry survey for June released on Friday, the average hourly pay of part-time workers rose 3.1 percent from a year earlier, up for the 64th straight month.

With Japan's mandatory hourly minimum wage to be raised by the largest margin of 25 yen this year, retailers, wholesalers and restaurant operators, which hire many part-timers, are struggling with rising payrolls, as well as lingering budget mindsets among consumers.

United Super Markets Holdings Inc. , the holding company of three supermarket chains in the Tokyo metropolitan area, saw its operating profits fall by 25 percent in the March-May period, battered by an increase of some 1.4 billion yen in costs for sales and administration due mainly to higher labor costs.

"Our conventional business model is not working well," with hourly wages of part-timers increasing faster than those of regular employees, said United Super Markets Holdings Chairman Makoto Ueda.

In the retail and wholesale sectors, companies including supermarket operator Life Corp. , clothing retailer Shimamura Co. and furniture and interior goods retailer Nitori Holdings Co. suffered profit falls due to high labor costs.

The restaurant industry is struggling with pay rises as well. Ootoya Holdings Co. failed to meet its target for launching new restaurants due to difficulties securing staff.

"Time, costs and other efforts for hiring have more than doubled," said Ootoya Holdings President Kenichi Kubota.

Amid labor shortages that a government report recently described as comparable to those observed in the asset-inflated bubble economy period, there is little businesses can do about rising wages.

Increasing prices is difficult due to the deep-rooted budget mindsets of consumers, while utilizing cutting-edge technologies such as self-service registers takes "considerable investment," said an official of a medium-size supermarket operator.

Businesses are continuing low-key efforts such as streamlining operations and strengthening communications to dissuade workers from quitting.

Amid a declining population, companies need to improve productivity to post profits and to survive, said Takuya Hoshino, deputy chief economist at the Dai-ichi Life Research Institute.

"Companies cannot help but invest for staff-free operations," Hoshino said, noting that "price hikes and service contraction both have limits." Jiji Press