Recently, I saw a link posted to Reddit about a poor programmer in Hokkaido, Jun (pseudonym), who was suffering on a salary of a mere ￥100,000 a month (less than USD $1,000). Jun had not had a successful career in the IT industry: multiple mistakes at past employers led him to finding a job as a contract programmer making the extremely low salary he pulled in at the time the article was written. He lived in a shared house with immigrants from Taiwan and Vietnam, and on some months, he had so little money that his food for the day was cereal and miso soup made from a tube.
The subject of this story is an outlier, to be sure. It sounds like a combination of on-the-job snafus combined with mental illness have kept his career stuck at ground level – a situation that some companies seem all too eager to take advantage of.
On the other hand, I’ve heard for years that the salaries paid to technical staff in Japan are quite low compared to other countries, particularly the US. How large a discrepancy is there? And has anything changed as the importance of tech in the day to day business operations of modern companies has exploded?
It turns out the answers are: Quite big, and not a damn bit.
How Huawei is Stealing Japan’s Tech Talent
It turns out that, while Jun’s salary is drastically low, it’s not that far off from what Japan’s System Engineers make straight out of college, which is is between ￥200,000 and ￥300,000 a month. That wage is well below the band for the corresponding role in the US, where Systems Engineers make an average of US $71,000 a year (close to USD $6,000/mo.). (Indeed, I started my career in a comparable job (Systems Analyst) for Eastman Kodak, and my yearly salary was $35,000. And that was back in 1995! My next position, at Microsoft headquarters in 1999, saw my salary nearly double.)
Japan’s numbers aren’t just low when compared to the US, however; they’re low in relation to other Asian countries. And that’s made the country’s long-suffering computer geeks easy to poach. President Online Magazine ran a story last year about how Chinese cell phone giant Huawei was able to scoop up a horde of talent in their Japan office by offering system engineers fresh out of college ￥400,000 a month – double what Japanese companies were offering at the time.
(Note: The President article uses the term “engineer,” which largely refers to Systems Engineers and Programmers.)
Seniority Over Talent
Why is Japan opening itself up to such talent grabs? Why haven’t wages for software engineers in Japan kept pace with the rest of the world?
Business professor Oomae Kenichi, author of the President article, laments that this lag in salary isn’t specific to engineers. “Engineers included,” he writes, “salaries for Japanese people haven’t changed in 20 years.” For his part, Oomae argues that the reason is built into the Japanese hiring system.
Employees, says Oomae, are treated equally in Japanese companies – to a fault. For example, employees are often hired with zero regard for their preferred fields or areas of specialty. An engineer in, say, the US will generally fashion themselves as a Big Data expert, or a specialist in Graphics Programming for games, large companies – and their pay will vary based on their area of specialty as well as their personal accomplishments.
By contrast, engineers in Japan are likely to see their pay increase step-wise with their peers, regardless of their accomplishments. Masuoka Fujio, who developed flash memory – the cornerstone of modern device storage, and a multi-billion-dollar market – found himself compelled to sue Toshiba when his employer only tossed him a few hundred bucks for his effort. (Toshiba settled with Masuoka for around US $850,000. Given how many billions Toshiba likely made off of flash storage, this is, by any measure, still a screaming deal.)
Riffing off of Professor Oomae’s piece, writer Matsumoto Takayuki, a programming teacher at a technical college, further builds on Oomae’s arguments by producing graphs from a study done by Japan’s Ministry of Economy, Trade and Industry (経済産業省) showing how dire the situation is.
One graph shows how salaries change in different countries as people age. While in China and America salaries tend to decline after age 30, in Japan, they rise in a linear fashion from one’s first job until the day one retires. It’s a clear demonstration that salaries are determined by seniority, not talent – known in Japan as the nenko-joretsu (年功序列), or seniority system.
In another set of graphs, Matsumoto shows that METI found how holding a Masters or PhD in one’s field made little difference in one’s pay in Japan. As a result, a whopping 74.2% of workers had no interest in pursuing a Masters, and 78.4% said they had no interest in obtaining a PhD.
Matsumoto, echoing Oomae, muses that, unless things change, Japanese engineers face two choices: either enter project management or become a people manager, or remain an engineer but resign yourself to subpar pay. Another option, of course, is to leave Japan and work abroad – a move that seems to be growing increasingly attractive to many Japanese engineers I meet.
It’s unclear what steps the Japanese government can – or should – take to rectify this situation. One potential agent of change is the rising number of companies who don’t follow the traditional hiring system schedule, which is set by Japan’s Federation of Economic Organizations (経団連). Startups, media companies and other industries eschew the Federation’s so-called “job hunting rule,” which restricts hiring to a set period between March and June. The advantage these companies have is so steep that the Federation has announced it’s officially abolishing the system in 2021.
While that will likely be a positive change, the country may need to consider other options to break its industries out of the seniority system mindset, or face risking their best and brightest minds to major firms from other nations. With its population declining and its economic fortunes still uncertain, that’s a mistake that Japan can ill afford to make.
