The labor ministry on Feb. 5 announced that real wages in 2024 continued falling for the third consecutive year, as pay increases failed to keep pace with rising prices. 

The average real wage per worker in 2024, taking prices into account, was down 0.2 percent from the previous year.

Total cash wages, or “nominal wages” that workers actually received, rose 2.9 percent to 348,182 yen ($2,300) per month, the highest increase in 33 years.

However, the consumer price index, which is used to calculate real wages, spiked up 3.2 percent.

Real wages, after subtracting this increase in prices, decreased 0.2 percent.

The negative range declined from 2023, when the figure was 2.5 percent.

Real wages rose in June, July, November and December in 2024, but only due to the large increases in bonuses.

The growth of basic wages has not kept pace with inflation and there is no prospect for real wages to remain in positive territory.

Household finances are becoming increasingly strained as wage increases fail to keep pace with the upsurge in prices.

Wage increases have been driven mainly by large companies.

The situation is becoming more pronounced at smaller companies, which account for the majority of workers, where wages have not been rising sufficiently.

A 46-year-old woman working at a welfare facility for the disabled in Tokyo is facing a difficult situation.

She said that the company managing the facility is demanding a 20,000 yen wage cut.

“I’ve been working here because I felt fulfilled, but I wonder if this is the reward for all the work I’ve put in for 20 years,” she lamented.

Her current monthly salary is about 350,000 yen.

She and her husband are both working, but they are raising three children, including two university students, and do not have much of their income to spare.

The reason given for the pay cut from the management company was to raise the wages of younger workers.

She said, “I’m disappointed in the way (the company) treats its long-time employees who have supported the facility.”

Rising prices of vegetables and other foodstuffs have hit the family budget hard.

She said her family has refrained from eating out and traveling.

“How do I find the motivation to work hard?” she wondered.

Some of her colleagues are considering changing jobs in search of better treatment.

Prices have risen significantly due to the economic recovery from the COVID-19 pandemic.

The nominal wage increase in 2024 was 3.3 percent for businesses with 30 or more employees, exceeding the rate of price increase.

However, the overall nominal wage increase in 2024, including businesses with five or more employees, was 2.9 percent.

It indicates that the rate of wage increase is lower for smaller establishments.

Takuya Hoshino, a chief economist at Dai-ichi Life Research Institute Inc., points out that nominal wage growth was not as strong as expected following the “shunto” spring labor negotiations in 2024, considered a historic pay hike.

According to statistics compiled by the central labor union organization Rengo (Japanese Trade Union Confederation), the average base increase, which is a uniform increase in base salary, in the 2024 spring negotiations was 3.56 percent.

On the other hand, according to the monthly labor statistics released by the ministry, the growth of the salary within the prescribed salary range, which corresponds to the base salary, remained in the 2 percent range.

Hoshino said that the large wage increases were limited to young workers, such as those on starting salaries, and also because the wage increases did not spread to small companies that do not have labor unions.

“Recently, prices of food and other items for which spending is unavoidable have been rising, and the burden on households is likely to be felt even more heavily,” he said.

Hoshino said price hikes in energy, food and other items are expected to continue for the foreseeable future due to soaring import prices caused by the prolonged depreciation of the yen.

Regarding future monthly real wages, he said that wages “will probably continue to swing back and forth between positive and negative territory.”

“Unless the positive trend continues for a certain period of time, domestic consumer spending will not pick up,” Hoshino said.