Archive for the ‘Economy’ Category

Part-timers skewing employment statistics

Thursday, January 2nd, 2014

Take this job and...: Want ads targeting part-timers for specific shifts at a Chiba Prefecture supermarket

Take this job and…: Want ads targeting part-timers for specific shifts at a Chiba Prefecture supermarket

When the government determines the success of Abenomics it has to take into consideration wage inflation, not just price inflation, since real growth can’t be sustained without both. Nevertheless, all wage inflation isn’t created equal.

A recent article in the Asahi Shimbun cited results of a regular survey conducted by Recruit Jobs, an employment-related research institute. In the major metropolitan areas of Japan the average wage offered to part-time food service workers in want ads in November was ¥930, which is 1.3 percent higher than the average amount offered in November 2012. More significantly, this year-on-year increase has been continuing for 25 consecutive months, the longest stretch of increases since the institute started tracking such numbers in 2007.

The standard wage in the restaurant industry is relatively low to begin with, and right now there is a shortage of help nationwide, so Recruit says employers are being forced to offer more money. One example cited by Asahi is a new mall that just opened in Makuhari, Chiba Prefecture, which contains a number of eating establishments, most of which belong to chain operations. Starting wages at these restaurants is between ¥1,200 and ¥1,300 an hour, which is even higher than they are in Tokyo. According to an official at Four Seeds, a company that owns several restaurant chains, more large retail facilities, such as shopping malls, are being built in an around major metropolitan areas, so there is greater demand for food service workers.

However, these numbers are misleading in terms of indicating whether or not the economy as a whole is on the mend. For one thing, the labor ministry says that just because part-time wages in major cities are going up, it doesn’t mean they’re rising for the rest of Japan.

The ministry found that in October, the average monthly take-home for “short-hour part-timers” was ¥94,634, which is 0.4 percent lower than it was in October 2012, and marked five straight months of year-on-year declines. And if the average pay for a part-timer in this industry in 2010 was set at 100, then the salary this year is 98.7.

Despite the fact that the national minimum wage was raised recently, average part-time income is dropping, mainly because companies are hiring more people to work short hours. For instance, the coffee shop chain Pronto targets housewives (which they call “mistresses”) in their 30s and 40s with the promise that they don’t have to work weekends and holidays. In addition, they can take off up to nine full weeks, without pay, of course, in a given six-month period. These women don’t work more than 20 hours a week, and the company likes it because under these conditions they can easily find women willing to work for low pay at short notice.

This trend is also prevalent in the supermarket industry, where employers pay housewives slightly more to work in the morning and the evenings since most housewives prefer only working in the afternoon when they don’t have household responsibilities.

In Tokyo, many food service companies offer higher wages only for peak demand periods to fill short-term staffing shortages. Other times they offer less money. The turnover is high, but this strategy allows the companies more options in controlling personnel costs on a month-to-month basis.

The point is that these workers supposedly want to work shorter hours, and the more people there are working shorter hours for slightly more pay, the more the statistics will reflect higher wages overall, but in truth the pay is just being distributed among more people, meaning per capita wages aren’t going up at all.

Of course, food services is traditionally considered an entry-level or temporary job, not a career track job, but as manufacturing continues to shift overseas, it is an industry that will become more vital as an employer. It’s not quite at the stage that it is in the U.S., where many fast food workers have to support families on what they make, but it might be getting there.

McDonald’s smells the coffee: Limited expectations are here to stay

Friday, December 27th, 2013

Fill 'er up: Customer using self-service coffee maker at 7-11.

Fill ‘er up: Customer using self-service coffee maker at 7-11.

If the central point of Abenomics is to boost prices and thus wages and consumption — the old “raise all boats” metaphor — then to a certain extent the plan has succeeded over the last year. Consumers don’t seem to be fixated on cheap goods and services any more, though, to be honest, it’s difficult to tell if this willingness to spend more is a function of anticipation for April’s consumption tax hike. But for the time being there seems to be that old desire for high quality stuff, regardless of how much it costs; which isn’t to say consumers aren’t looking for cheap things, only that they aren’t making it a priority any more.

This paradox seems to have had a bad effect on the fortunes of a company that some once thought was invincible: McDonald’s. Since August, the fast food behemoth’s Japanese operation has had to lower its sales projection for fiscal 2013 twice. Profits are expected to be around ¥5 billion, or a whopping ¥6.7 billion lower than originally thought. Sales have decreased five months in row, with the number of customers dropping for 7 consecutive months. The company is telling the media that the reason is “no hit product” this year, thus making it sound like a PR failure, but according to Asahi Shimbun, and almost every other Japanese media that has reported the story, McDonalds’ poor showing seems to be more systemic, an indication of a sea change in consumer sentiment.

The company’s response has been to bring in new blood. Sarah Casanova, a Canadian, was appointed president of McDonald’s Japan last summer, and, again, it seems to be more a matter of an image makeover. The announced new strategy is to target women as a demographic, since it is younger females who have tended to resist McD’s charms the most during its two straight years of falling revenues. The plan reinforces “healthy menu” items, which to a company like McDonald’s means offering more things with chicken in them.

Though it doesn’t sound like much, it’s actually quite a turnaround. When the previous president, Eiko Harada, was appointed in 2004 his big move was pushing the so-called ¥100 Mac, the cheap hamburger that was always going to be McDonald’s mainstay, and it worked. For the next six years profits grew.

The next big coup was ¥100 coffee, which effectively challenged coffee shops and coffee chains like Starbucks. Then the company made over their restaurants with more attractive decor. These various gambits were predicated on boosting the brand, but actually it was the price and the speed of service that mattered to customers. People buy McDonald’s hamburgers not because of the taste or the atmosphere, but because they’re cheap, and the same went for the coffee, which was pretty good considering but not as good as Starbucks, for what it’s worth.

To make matters worse, McDonald’s raised prices in the past year, thinking that the economy justified the change, and in a way it did, but people don’t think that way about McDonald’s. They aren’t willing to pay more for fast food, no matter how well it’s presented or how nice the decor is.

In the era of Abenomics, that means any competition can eat into McDonald’s sales more easily. Just as McD stole customers away from Starbucks when it launched its ¥100 coffee, now convenience stores are taking business away from McD with their own cheap coffee. About a year ago 7-11 put self-service coffee machines, which grind beans and brew coffee while you wait, in 16,000 stores, and by September they had sold 200 million cups. It only costs ¥100, and other CS have followed suit, though Lawson’s coffee is a bit more expensive at ¥150.

The market has grown so much that the consumer report magazine Nikkei Trendy named convenience store coffee the #1 hitto shohin (hit merchandise) of the year. It should be noted that Japan is a formidable coffee market, number 4 in the world in terms of consumption — 50 percent more than green tea, in fact. Even sushi restaurants are now serving fresh coffee. More significantly, 7-11 reports that its new coffee service does not subtract from other in-store coffee-related sales, such as canned coffee or chilled pack coffees. It’s simply gravy.

But someone has to lose in this equation, and it seems to be McDonald’s, which has a lot to lose. After all, ¥260 billion, which is McD’s projected revenue this year, is still a great deal of money. The problem is that McD is associated with hamburgers, whose traction on the Japanese imagination has always been tentative. Older people don’t really eat them as much, and Japan, as everyone knows, is the fastest aging society in the world.

Also, the tendency to eat out is becoming weaker in Japan as the population ages. Restaurant sales have decreased by 20 percent since they peaked in 1997. The weekly magazine Gendai, in typical hyperbolic fashion, has predicted the end of McDonald’s in Japan after reporting that the company will have closed 160 outlets by the end of this fiscal year.

Young women’s life preferences acknowledge workplace reality

Friday, September 27th, 2013

Preference or default?

Preference or default?

Social media has been buzzing about the results of a survey released this week by the Ministry of Health, Labor and Welfare. The survey was carried out last March among men and women, both single and married, between the ages of 15 and 39. The results that provoked the most discussion had to do with attitudes toward marriage, or, more precisely, a woman’s role in a marriage.

When asked if they want to be full-time homemakers, 34.2 percent of the female respondents said “yes” or “probably.” And while more women, 38.5 percent to be exact, said they didn’t want to be homemakers, the portion who said they did was apparently higher than people expected, especially now that the government is pushing an agenda to make it easier for women to join the workforce and contribute more directly to the economy.

Some people are saying that these results indicate a regressive attitude among women, but it’s impossible to say from the results that the women who want to be homemakers are being guided by some kind of cultural gender identification.

When men were asked in the survey if they wanted their wives to be homemakers, 19.3 percent said “yes” or “probably,” which implies that the other four-fifths want their wives to work. That’s because they know that a single income isn’t enough any more to support a household, especially one that does or will someday include children.

When the women were asked how much income they thought their husbands should make a month, 40.8 percent said ¥200,000-¥300,000, 24.8 percent said ¥300,000-¥400,000 and a mere 4.2 percent said “it doesn’t matter.” So much for marrying for love.

A more likely reason for this desire to stay at home is a perceived understanding of workplace norms, something the labor ministry didn’t ask about. In a different survey conducted by the Japan Management Association, young men (751) and women (249) already in the workforce were asked if they aspired to be leaders among their colleagues. Of the female respondents, 81 percent said they would rather be “supportive.”

One of the more pressing issues in Japan is the paucity of women managers, a situation that is blamed on implacable male dominance in the workplace. The association analyzes this result as meaning that women value their private lives over their careers. In other words, they don’t think they can raise children or have families if they are in leadership positions. And, in fact, this is still a widely held belief.

Aging boomers may prove to be just as tight with savings

Tuesday, September 17th, 2013

Praying is free (but the incense will cost you)

Praying is free (but the incense will cost you)

The media has been all over the new figures related to seniors that were released by the Ministry of Internal Affairs and Communications to coincide with Respect for the Aged Day. To recap, the number of Japanese people over 65 increased by 1.12 million from the previous year, which marks a 0.95 percent rise.

The big news is that this brings the total number of seniors to about 32 million, or one-fourth of the entire population. This was expected since the huge cohort of baby boomers — which in Japan refers only to people born during a brief period in the late 1940s — is now passing the 65-year mark, and the projection is that seniors will make up a third of the population by 2035. To break down these portions even further, 18 percent of the population is over 70, 12 percent over 75 and 7 percent over 80.

What hasn’t been discussed as widely is the economic ramifications of these developments. In 2012 there were 5.95 million people over 65 who were still in the work force, or 9.5 percent of all workers over the age of 15. The average amount of savings — whether bank accounts, annuities or securities — of households with more than one person where the householder is at least 65 is ¥22.57 million. The average savings of all households is ¥16.64 million. Also, 16 percent of over-65 households have savings of more than ¥40 million, while only 10 percent of all households have saved that much.

The hope has been that once they retire boomers will spend their savings more readily than did previous generations, but so far that doesn’t seem to be the case. The ministry’s statistics indicate that more money is being spent by seniors who are still working. Those who aren’t working, meaning they are on fixed incomes provided by government or company pensions, are spending much less.

In either case, working or not, the seniors are not touching their savings. They are only spending their income. In the parlance of economists, they are asset rich but cash poor. The average income of an over-65 household is ¥2.96 million (that of an average household in general is ¥5.8 million), but the median income of an over-65 household is ¥2.29 million, meaning the majority of these households are within the ¥1 to ¥3 million income range, and that’s what they are living on.

A Cabinet Office survey conducted in 2011 asked seniors what the purpose of their savings was. About 62 percent said it was for sudden illnesses and future care and 20 percent said it was for “maintaining existence” in case of an unexpected financial problem. Only 5 percent said they would spend it on leisure, and a mere 1.6 percent wanted to use it for travel. It should be noted that 90 percent of these respondents owned their own homes or did not pay rent, so housing, at least, was not a primary concern. However, given the cost of private nursing homes, which charge upwards of ¥20 million just to move in, it’s perfectly reasonable to think that seniors believe they have to save for those final years. Until that sort of anxiety is addressed, it will always be difficult to get seniors to part with their savings.

Men start taking advantage of nursing shortage

Friday, September 6th, 2013

Two posts ago we talked about how difficult it is for men to become flight attendants in Japan, where the job is still considered women’s work. However, another occupation that in the past was solely associated with women, nursing, is now openly encouraging male applicants, and the men are signing up. In the West, of course, there have been male nurses for decades, but because of tenacious gender roles and the fact that nursing is still a poorly paid position, Japanese men until recently have never tried to break into the field. That’s changing.

Web ad for Komatsu Nursing School in Ichikawa Prefecture with representative gender ratio

Web ad for Komatsu Nursing School in Ichikawa Prefecture with representative gender ratio

According to health ministry surveys, there were 63,000 male nurses working in Japan in 2012, which is two-and-a-half times the number ten years ago and six times the number 20 years ago. Nevertheless, this number only accounts for 6.2 percent of all the nurses in Japan. It is still overwhelmingly considered a woman’s job, but the numbers are increasing. Asahi Shimbun reports that 17 percent of the 112 students who enrolled last spring at a nursing school in Atsugi, Kanagawa Prefecture, were male. The portion of men among the new class was even larger at a nursing school in Osaka City — 28 out of 118.

What’s significant, however, isn’t the portion, but the age range. The youngest are just out of high school or college, while the oldest is in his mid-40s. Since nursing schools are essentially technical schools (senmon gakko), they don’t follow the archaic university custom of effectively limiting enrollment to recent high school graduates, and many men who want to change career paths are opting for nursing.

One 31-year-old student at the Atsugi school told Asahi that he worked in the administrative department at a preparatory school after graduating from university, but he was always a contract worker and his salary never rose the whole time he worked there. Now that he’s married and has a child, he wants something more stable and potentially lucrative.

A 22-year-old fourth-year student at the Osaka school, which opened in 2010, thus making him a future alumnus of the school’s first class, said he originally wanted to be a paramedic, but his mother suggested nursing because she had read that local governments were cutting budgets for ambulance service. He’s already been offered a full-time job at a general hospital in Osaka.

Almost all nurses are hired as full-time regular employees with benefits, because the demand for nurses remains high. In 2013, the health ministry estimated a nationwide nursing shortage of 42,000. The projection for 2014 is 30,000, which takes into consideration the number of people who will be graduating from nursing schools next year, though it doesn’t necessarily factor in turnover, which is high.

The annual turnover rate nationwide is 10.9 percent, but in major cities, where most nurses work, it’s over 14 percent. The reasons are obvious: long and late hours, demanding work conditions and pay that many don’t think is fair compensation. Almost all nurses are women, and when they get married or have children they often decide to quit the business altogether.

The chief nurse at a hospital in Otaru, Hokkaido — a woman, it should be noted — told the Asahi that her department was actively recruiting male nurses because they are perceived as looking at the occupation in the long term, as a real career, as if women didn’t. “We can reduce turnover,” she said. The health ministry says that there are 550,000 “hidden nurses” in Japan, meaning women with nursing licenses who no longer work as nurses.

According to the National Personnel Authority, the average monthly pay for a 37-year-old nurse in Japan is ¥346,000, while that of a 35-year-old general office worker is ¥320,000, so actually the pay is slightly above average. Moreover, the Japan Nursing Association says that pay for nurses were not adversely affected by the recession five years ago. Starting salaries tend to be pegged to educational level: though all nurses must go to nursing school and pass a test, those who went to university beforehand usually start at higher salaries than those who are only high school graduates.

This is another area where men have the advantage. Men who enter nursing now tend to be college graduates, while women usually go to nursing school right out of high school, or even junior high school. Traditionally, many women became nurses by going to high schools with nursing programs. Another change that has made nursing more attractive is lighter work loads. In 2006 the health ministry implemented guidelines that mandated one nurse per seven patients in a hospital. Previously, the ratio was one to ten.

How economically effective are the Olympics?

Monday, September 2nd, 2013

Group effort: Poster promoting Tokyo's bid for the 2020 Olympics at a mall in Chiba Prefecture

Group effort: Poster promoting Tokyo’s bid for the 2020 Olympics at a mall in Chiba Prefecture

The Asahi Shimbun recently reported that one of the reasons the Japanese government has been slow to tackle the water leak crisis at the crippled Fukushima Daiichi Nuclear Power Plant is that it doesn’t want to draw attention to the problem while Tokyo remains a candidate for the 2020 Olympic Games. Despite the fact that the Olympics are supposed to be hosted by cities not countries, Japan’s central government is counting on the games to boost its overall economy, and Asahi also reports that the decision, which will be determined on Sept. 7, will have a very strong bearing on whether or not the consumption tax increase will take place in April. If Tokyo is the winner, the tax will go ahead as planned.

The Japan Olympic Committee is predicting a long-term economic boost of ¥3 trillion if Tokyo gets the games. That’s a lot of money, but while it may offset the negative effects of the consumption tax increase temporarily it’s hardly enough to kick start the entire Japanese economy. In any case, how exactly would the Olympics bring about this financial miracle? After the games last year, the city of London and the U.K. government jointly announced that the event benefited the British economy by almost £10 billion (¥1.5 trillion). However, the BBC questioned just how much of this “impact” could be directly attributed to the Olympics. In addition, the Financial Times wondered about the government’s calculation that the Olympics would have a secondary effect on the British economy that would amount to between £28 billion and £41 billion (¥4.2 trillion-¥6.0 trillion) until the year 2020. A financial expert interviewed by the FT said he had no idea how the government arrived at this figure.

To get some idea of how this “economic effectiveness” (keizai koka) is calculated, the Nihon Keizai Shimbun evaluated the figures submitted by the Tokyo Bid Committee for the 2016 Olympic Games, which Tokyo lost to Rio (page 5). Included in the ¥2.94 trillion that was to be added to the Japanese economy by the games was ¥332 billion in the form of construction outlays, ¥175 billion to be spent by “guests,” ¥356 billion in sales of official merchandise and “related purchases” (like TV sets that people bought to watch the games), and ¥86 billion from tourists who would visit Tokyo before the games, presumably drawn to the city because of the Olympics though they would not actually attend them.

Moreover, the JOC predicted a “ripple effect” of ¥990 billion in related “demand” after the Olympics ended, and then a secondary effect of ¥650 billion from the higher salaries and added jobs that this ripple effect would engender. Except for the construction costs and revenues for restaurants and hotels during the actual two-week Olympic period, all these figures are speculative and based on phenonema that are difficult to measure. For instance, isn’t there a lot of overlap between the spending of tourists and the purchase of merchandise related to the Olympics?

The point is, when the media says that the 2020 Olympics will boost the Japanese economy by ¥3 billion people think that means ¥3 billion will be added to the economy, but actually most of that money is simply being redistributed. Tokyo, for instance, says it will spend ¥1 trillion on the 2020 Olympics, and according to the JOC the city has ¥400 billion “saved” in what it calls junbikin (preparation money), which is cash that the prefectural government has accumulated at a rate of ¥100 billion a year. However, it is all from taxes, which means that the money that goes to construction came from residents.

Moreover, the central government has pledged to cover any shortfall in operating expenses for the Olympics, so presumably that means it will provide the remaining ¥600 billion (or more), which also comes from tax money. Since most of the work that is created directly for the Olympic Games is done by volunteers, this money is not necessarily going to people in the form of employment and wages. The assumption, or at least the hope, is that Olympic money that goes to big corporations will eventually trickle down to people in the form of the aforementioned ripple and secondary effects, but, as the FT expert implied, there’s no way you can confirm this until it actually happens.

Hot biz: stocks that climb with the temperature

Tuesday, August 20th, 2013

You can never have too few air conditioners

You can never have too few air conditioners.

The extremely hot weather that has covered Japan since late July has had a multiplying effect on the country’s economy. Though it isn’t going to solve all the government’s fiscal problems, the heat has temporarily revitalized some retail and service sectors and, in turn, driven up related stock prices.

Some are obvious. Makers of air conditioners, particularly Fujitsu General and Daikin, have seen their share prices rise markedly in recent weeks. Meiji Holdings’ stock has increased by 20 percent since the middle of June thanks mainly to their ice cream division. Other makers of cold treats, like Ezaki Glico and Morinaga, are also enjoying high stock prices. Beverage makers can always look forward to good sales in summer, but this year in particular breweries are having their best season in 2 years. Shares for convenience stores have also risen steadily since the middle of July, based on strong retail sales as a result of the hot weather.

Another sector that’s benefited is Internet retailers. Yumenomachi Sozo Iinkai, a web supermarket, posted record high stock prices on Aug. 8 because of its special delivery system. People just don’t want to go outside in this heat, so they even order their groceries online and have them delivered. The nation’s biggest supermarket chain, Aeon, has said in terms of volume, deliveries have increased by 50 percent since the hot weather started. Even Tsutaya, Japan’s main rental video service, has seen its deliveries of DVDs double over last year’s.

Tokyo Shimbun reports that department stores, which deliver goods but count more on customers actually showing up at their stores, have initiated special events to get bodies out of the house and into their air-conditioned spaces. Shinjuku’s Takashimaya, for instance, has an unusual policy. The first 40 patrons who visit the food fair in the store’s basement between 2 and 5 p.m. on days where the temperature hits 35 degrees get free watermelon or a free extra scoop of gelato if they buy a single scoop.

A representative of a securities company told Asahi Shimbun that another reason for the sudden jump in stock prices was the Upper House election, which essentially pushed economic news aside. Investors had little information with which to make decisions, so when the hot weather became a topic they immediately went to companies that they thought would benefit.

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