TOKYO -- While starting salary increases and wage hikes are gaining momentum in Japan, pay increases tend to favor younger workers, while those for middle-aged and older workers are stagnant or declining. Why is this generational gap occurring?

Looking back at the 2024 spring wage negotiations, the average wage increase exceeded 5%, a historic rate of growth. Young workers were the ones who received generous allocations.

According to the results of a survey on top company executives and management compiled by the Japan Business Federation, commonly known as Keidanren, on the content of labor-management negotiations last year, 34.6% of the respondents said they put an emphasis on allocating base salary increases to younger workers (up to around age 30) when asked how they specifically distribute such rises, allowing multiple responses.

In contrast, only 1.1% chose to "focus on veteran employees (around age 45 and above)," indicating that most of the funds for base salary hikes were allocated to younger workers.

How has regular salary, excluding overtime, changed? Hideo Kumano, chief economist at the Dai-ichi Life Research Institute Inc., compared the rate of change over the last five years from 2019 to 2024 by age group based on the labor ministry's Basic Survey on Wage Structure, and found that the highest increase was 10.3% for the 20 to 24 age bracket, followed by the 25 to 29 with a 9.5% increase. The 30-34 age range increased by 5.8% and the 35-39 by 4.8%, while the 40-44 had a 0.1% rise and the 45-49 had a 2.1% boost. However, the 50-54 age group showed a decrease of 3.0%.

The 55-59 age group saw a 4.9% rise, which at first glance would seem to indicate an increase in salary. However, Kumano explained, "Since companies have postponed promotions and advancements compared to previous generations, people in this age bracket are seeing the delayed increase in wages. In terms of the monetary amount, there has been a decrease."

The most disadvantaged age group, Kumano pointed out, is the 40-54-year-olds. One of the reasons for their low rate of increase in salary is that they are part of the so-called "employment ice age generation."

This generation refers to those who entered the workforce between 1993 and 2004, when Japan's "bubble" economy burst. At that time, the jobs-to-applicants ratio was less than 1, and even large companies drastically reduced their hiring quotas. As a result, many people of this generation had no choice but to choose workplaces with inferior working conditions, such as non-regular employment.

Kumano said, "If the employment environment is bad at the time of finding a job, it becomes a turning point in one's life, and determines one's lifetime income. Such negative effects are occurring." Some in that generation may not have had the opportunity to gain experience commensurate with their age and ability, or to build assets such as pensions.

In an effort to secure young human resources, there has been an accelerated trend to raise starting monthly salaries, and it is no longer unusual for companies to offer more than 300,000 yen (about $1,960).

On X (formerly Twitter), comments from those who appear to be from the ice age generation included, "I'm jealous," "The middle class (ice age generation) is left behind," and "At least let us live on a pension." Another lamented that they would be a "stepping stone (for someone else's success) until we die" because of the prolonged unrewarding period since they started working and the grim prospects for their retirement.

In response to the move to leave middle-aged and older workers out of wage increases, Kumano stated, "It is necessary to review the uniform employment system that divides workers by age." He also said, if a performance-based compensation system is introduced and employment without age discrimination is expanded, there will be hope for workers in such generations, and this will help solve the labor shortage.

(Japanese original by Yuko Shimada, Business News Department)