From schoolteachers to maritime workers, Japan’s civil servants will likely see the biggest salary increases over three decades, a development expected to help spur a recovery in consumer demand.
The National Personnel Authority recommended Thursday a 2.76% increase in the average monthly base pay for public servants in the current fiscal year, which would be the largest gain since 1992. Total wages should rise by around 4.4%, according to the proposal.
The personnel authority also suggested a substantial boost in starting salaries for national civil servants, an indication that the competition to secure personnel is heating up as the nation’s chronic labour shortage persists. It proposed a 14.6% raise for incoming workers who graduated from universities, compared with a 6% increase for such workers in the previous year.
Japan’s shrinking and ageing population is forcing employers to scramble for young talent. The number of new graduate applicants for regular positions in the public sector reached its lowest level since 2012 this spring, according to the authority’s March report.
“Securing human resources for the national civil service remains challenging, as more young people leave the workforce and the number of applicants for clerical positions declines. Appropriate compensation is essential for securing excellent human resources, and we are updating the salary system and comprehensively reviewing employee treatment,” said the authority’s president Yuko Kawamoto in a speech.
The finance ministry estimates that implementing these recommendations could increase the financial burden of sustaining services by roughly ¥382 billion.
Public sector wage growth lags behind the private sector. In this year’s wage negotiations between unions and employers, some private-sector workers secured pledges for total pay hikes of 5.1%, with base salary increases of 3.56%.
The slower wage growth for public employees is said to be partly driven by stagnant public service charges. To address the situation, Prime Minister Fumio Kishida’s government has introduced several measures to raise these prices to secure funds for pay hikes. Steps include revisions to medical and elderly care service charges.
Higher labour costs in the public sector have been steady for some time. The latest inflation report showed that public service price gains have remained around 0% for the past three years, despite general service price increases hovering around the Bank of Japan’s 2% goal.
“The upward pressure on wages due to higher labour costs is spreading to some of the ‘rock-solid’ utility prices,” said Hiroshi Kawata, a senior economist at Mizuho Research & Technologies.
The BOJ is closely monitoring service price developments as it considers the timing of its next normalisation step. Governor Kazuo Ueda indicated last week that a rate hike could be on the table before the end of the year if economic conditions align with the bank’s projections.
Deputy Governor Shinichi Uchida said earlier this week that the central bank would refrain from hiking rates if financial markets are unstable. – Bloomberg
