The effects of the new coronavirus are also evident in wages. The epidemic’s impact on the consumption tax hike has complicated the 2020 spring labor offensive, or wage negotiations. In 2020, the wage increase rate ("Major private-sector companies’ demand for wage increases in the spring" by the Ministry of Health, Labor, and Welfare) decreased by 0.18 percentage points from the previous year to 2.00%. Bonuses that are highly linked to business performance have declined even more severely than base salaries. According to a survey by
Nihon Keizai Shimbun, bonuses in the summer of 2020 dropped by 5.37% compared to the previous year. Corporate profits had already deteriorated following the slowdown of overseas economies and the hike in the consumption tax rate. In FY 2020, however, many companies were facing a deficit due to the impact of the new coronavirus, and the margin of decrease is expected to exceed that of the world financial crisis. Bonuses are likely to fall further after the winter of 2020.
Employers’ remuneration grew steadily, mainly due to an increase in the number of employees because of labor shortages at companies. However, with a decrease in the number of employees and in wages per employee in the April–June quarter of 2020, it declined by 2.7% from the previous year, the first decline since the January–March quarter of 2013. Nominal employee compensation in FY 2020 is expected to decrease by 3.2% from the previous year, the first decrease in eight years.
Yet the provision of special flat-sum benefits will boost households’ disposable income. On a macro basis, the amount of special fixed benefits paid was 12.7 trillion yen, exceeding the decrease of 9.2 trillion yen in employee compensation. Therefore, households’ disposable income in FY 2020 will increase by 1.8% from the previous year, which will ease the decline in consumption. However, because the rise in the amount of special flat-rate benefits is only temporary, disposable income in FY 2021 is expected to decline sharply as a reaction. In the long run, the deterioration of the employment income environment is likely to delay the recovery of consumption.