Japanese Clothing Giant Uniqlo Offers 40% Pay Rise; Japan's Low Wage Problem in Focus

Japanese clothing giant Uniqlo shocked the corporate world on Wednesday, saying it was offering a 40 percent raise in staff salaries. The wage hike announced by Uniqlo parent Fast Retailing Co Ltd goes against the trend in Japan, where wage hikes have historically been frugal.

Uniqlo, which was founded in Yamaguchi in 1949 as a textiles manufacturer, is now a global giant with more than 3,500 stores around the world.

Uniqlo in Sanlitun, Beijing, China Wikimedia Commons

Significantly, it is also the first time in 20 years that the company is revising remuneration across its entire group, spokesperson Pei Chi Tung said. The pay hike will be rolled out from March.

While new graduate employees would get $2,300 (300,000 yen) per month, new store managers will get around 390,000 yen a month. This represents a pay hike of 18 percent and 36 percent, respectively.

'Urgent Need to Raise Pay'

The company said there was an urgent need to raise pay, in order to bring the pay package on par with global rates. The company had increased the salaries for hourly-paid employees in September last year.

Uniqlo said the pay rise is aimed at remunerating "each and every employee appropriately for their ambition and talents, as well as increase the company's growth potential and competitiveness in line with global standards."

The statement added: "In Japan especially, where remuneration levels have remained low, the company is significantly increasing the remuneration table."

What's Behind the Move?

The company has cited the need to remain competitive in the market in terms of pay packages, while analysts also add that sustained high inflation has also been a reason behind the aggressive move. Analysts agree that Uniqlo's move is goof for the economy as it will mark a rising trend of corporates remunerating employees better.

"Fast Retailing aside, there have been a number of companies that up to last year have significantly boosted their rate of pay increases. That's a positive factor for the Japanese economy," Taro Saito, executive research fellow at NLI Research Institute, said, according to Reuters.

PM Kishida's Call

Japanese Prime Minister Fumio Kishida has called on companies to raise their wages in the backdrop of rising inflation and the cost of living.

Japan's work hours
Office workers are reflected in a glass railing as they cross a street during lunch hour in Tokyo June 1, 2015. REUTERS/Thomas Peter/File Photo GLOBAL BUSINESS WEEK AHEAD PACKAGE - SEARCH BUSINESS WEEK AHEAD SEPTEMBER 26 FOR ALL IMAGES Reuters

The Japanese government welcomed Uniqlo's announcement. "We welcome reports of companies that have announced aggressive wage hike policies ... We believe that the best way to address the current increase in prices is to realise continuous increases in wages," top government spokesperson said.

Though Japan is the world's third largest economy, poor employee pay has been a lasting problem. Average annual pay in Japan in dollar terms was only $39,711 in 2021, compared with the OECD average of $51,607.

The company said the pay hike move will result in a 15 percent rise in personnel costs, compared with a year ago.