Cabinet Office, Government of Japan

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Annual Survey of Corporate Behavior(Summary)FY2004(April 28,2005)

Background and purpose of the survey

Following the collapse of the "bubble" the Japanese economy was in a prolonged slump, which has caused corporations to be under the long-lasting burden of excessive employment. Such situation has brought about some changes in corporate human resources management. Corporations have started cutting jobs and reducing the number of regular employees/staffers replacing them with nonregular personnel such as part-timers and contract/temporary employees. They have also begun to curb hiring new graduates for regular employees/staffers and give greater importance to midcareer recruiting. In addition to that, corporations have been revising policies regarding the management and development of human resources, as well as their treatment, wage system and evaluation method.

With respect to the current situation of such human resources management and wage systems, we conducted a detailed survey in FY1999 titled "The outlook for efforts for earnings improvement and restructuring". Five years have passed since then, and of late, corporations are feeling that their over-employment situation has been considerably alleviated. To grasp changes for five years and the recent moves we conducted survey to keep track of how corporations are thinking of utilization of human resources and wage systems for the present and for the future.

As in the past surveys, we made a survey on the "Business environment and basic management policy" of Japanese corporations (Chapter 1), "Human resources: current situation and future outlook" (Chapter 2): changes caused and effects achieved by restructuring measures over the last five years relating to human resources and future policies related thereto, "Development and securing human resources: current situation and future outlook" (Chapter 3): ability development of internal human resources and utilization of external human resources, and "Wage system: current situation and future outlook" (Chapter 4): revision and future policies regarding the wage system including adoption of a system based on ability, performance and contribution seeking to make a better use of internal human resources.

How survey was conducted

(1)Period of the research: January 2005.

(2)Survey items:

(i) Business environment and management policy;

(ii) Current situation and future outlook of human resources;

(iii) Current situation and future outlook of development and securing of human resources;

(iv) Current situation and future outlook of wage system.

(3)Coverage: corporations listed in the first and second sections of stock exchanges in Tokyo, Osaka and Nagoya (2,512 companies in total).

(4)Survey method: self-reporting mailing method using prescribed questionnaire.

(5)Responded by: 1,031 (561 of manufacturing sector and 470 of non-manufacturing sector).

(6)Response rate: 41.0%.

Main points of the survey results

The expected economic growth rate remains on the same level as in last year's survey; capital investment is picking up; and employment is increasing.

Real economic growth rate forecast by corporations is 1.4% for the next year (FY2005), 1.5% (average annual rate) for the next three years (FY 2005-2007), and 1.6% (average annual rate) for the next five years (FY 2005-2009). These expected growth rates remain on the same level in the survey of last year. Capital investment will grow at an average annual rate of 4.7% over the next three years on an all-industry basis, up from 3.1% of the previous survey. Employment is expected to grow over the next three years for the first time in 12 years. The ratio of overseas production (output) slightly dropped from FY2002's 13.2% to 13.1% in FY2003 for the whole manufacturing industry; however, it is estimated to have risen to 14.0% in FY2004, and is expected to continue on an upward trend rising to 16.7% in FY2009. Exporting corporations replied that they would break even at the rate of 102.6 Japanese yen per U.S. dollar. This is the highest yen rate ever replied.

The increasing pace of the ratio of contract, part-time, and temporary employees/workers is slower.

As to the sections where corporations feel that employment is the most excessive or deficient, they feel deficient employment in "Sales & Marketing" and "Research & Development". On the other hand, they feel excessive employment in "Production", "Personnel", "Accounting & Finances", and "Information Systems".

By age bracket, the under-29, the 30-39 and the 40-49 are felt deficient employment group, while the 50-and-older is felt excessive employment group.

What differences are in the constituent ratios by form of employment between the area which most increased employees and most decreased over the last three years, and by form of employment between the area which will most increase employees and most decrease over the next three years? The ratio for "contract employees" increased 12.7 percent points for the past three years, and will increase 4.6 percent points over the next three years. The ratio for "part-timers and temporary workers" increased 7.4 percent points for the past three years, and will increase 1.5 percent points over the next three years. The ratio for "full-time regular employees/staffers" decreased 20.2 percent points over the past three years and will drop by another 6.1 percent points over the next three years. Although the ratio of contract employees, part-timers and temporary workers to the total number of employees will continue to rise, the pace of such increase is forecast to slow down.

Midcareer employment is growing.

We took the difference between the proportions of the corporations that replied "decreased" in the ratio of midcareer-hired fulltime regular employees/staffers from the proportion of the corporations that replied "increased" over the past five years. It is 43.1 percent points on an all-industry basis, which shows that the ratio of midcareer-hired fulltime regular employees/staffers has been increasing. Also the difference over the next five years is 50.3 percent points. It indicates that midcareer employment will continue to rise.

The wage gap among same-age employees is widening and seniority factor is dwindling.

Suppose the average wage is 100 for the 40-49 age bracket employees. When we compare the highest and the lowest wages among age brackets, both the highest and the lowest wages are higher in older age brackets. This result means that the wage system is based on age (seniority-based wage system). The same tendency was also seen in the previous survey of FY1999. However, the highest wage has increased and the lowest wage has decreased in each age bracket over the last five years. This indicates that the gap between the highest and the lowest wages is widening. The highest wage has risen 2.9%(from FY1999) for the up-to-39 age bracket, while it has grown only 1.0%(from FY1999) for the 50-and-older. On the other hand, the lowest wage has dropped 4.5%(from FY1999) for the up-to-39 age bracket, while it has reduced 6.4%(from FY1999) for the 50-and-older. Thus, the difference in the highest wages in the each bracket and the difference in the lowest wages have become narrower, and the seniority factor in terms of wage is dwindling.

The wage gap at corporations with performance-based wage system is widening faster.

Now we look at internal wage gaps by age bracket (the highest wage divided by the lowest wage) to investigate the effect of introducing performance-based-wage system. The wage gaps are summarized in the following.

(1) The average of wage gap for the up-to-39 age

All respondent corporations(answered in both FY1999 and FY2004): FY1999/1.57, FY2004/1.69

Corporations introducing performance-based wage system(50% or more of the total wages are paid on performance basis): FY1999/1.70, FY2004/1.91

(2) The average of wage gap for the 40-to-49 age

All respondent corporations(answered in both FY1999 and FY2004): FY1999/1.52, FY2004/1.66

Corporations introducing performance-based wage system(50% or more of the total wages are paid on performance basis): FY1999/1.64, FY2004/1.85

(3) The average of wage gap for the 50 and older

All respondent corporations(answered in both FY1999 and FY2004): FY1999/1.50, FY2004/1.62

Corporations introducing performance-based wage system(50% or more of the total wages are paid on performance basis): FY1999/1.63, FY2004/1.80

These results indicate that in all age brackets wage gaps have grown at a faster pace in corporations where 50% or more of total wages are paid on performance basis over the five-year period between FY1999 and FY2004.

Contact

Questions about this survey can be made to HERE

Cabinet Office, Government of JapanEconomic and Social Research Institute
1-6-1 Nagata-cho, Chiyoda-ku, Tokyo 100-8914, Japan.