Bloomberg Businessweek

Why Wages Aren’t Growing profits salaries

It’s a global problem. And shareholders and managers—and the demise of unions—may be to blame

The very first thing any college freshman learns in Economics 101 is the law of supply and demand. When people desire more of something but its availability is limited or constrained, its price goes up. There may not be another economic rule more basic and logical.

Yet Japan, that land of eternal economic mystery, is apparently defying this most sacred principle. The problem is wages. Japan’s labor market is the tightest it’s been in decades. The unemployment rate has sunk to only 2.8 percent, the lowest in 23 years, while the number of available jobs compared with applicants has reached levels not seen since the early 1970s. Add in an aging, shrinking workforce unable to generate many reinforcements, and simple mathematics leads to the conclusion that wages should be increasing—based on current market conditions, by at least 2 percent a year.

But they’re not even close to rising at that rate. Growth of worker compensation has been minimal this year.

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