Terrie's Job Tips -- Forecasting Employment Conditions for 2009

The emerging recession looks like it could be bad. So bad in fact, that some economists are saying it will be the worst in a lifetime - certainly the worst in 50 years anyway. As with all recessions, this one features a spectacular loss of confidence on the stock markets and a number of market corrections before things settle down. But what’s different this time around, from, say, 2002, is not only is there a loss of confidence in Japan, the contagion is global - meaning there is no where safe for international investors to park their money and wait things out.

Further, it is becoming clear that the level of sub prime-related securities and debt obligations still unaccounted for in the shadowy world of derivatives is massive. So massive in fact that none of the world’s banks or their respective governments appears to have the cash needed to deal with the problem. Current estimates are that the overall cost of the sub prime derivatives is going to be in the trillions of dollars and this means that there will be no short cut rescue to the system, despite the best intentions of the U.S. Secretary of Treasury.

Knowing these basic facts should prepare you for what I think is going to be a very challenging 2009 for us all. The level of fear by employers overseas is starting to spread to Japan, and already companies in the Western world are firing large numbers of people. In the USA alone last week, 27,000 people joined the jobless queues, the highest new number of unemployed for 16 years, and the jobless rate there is now 6.5%. Analysts expect the rate to soar to 9% next year.

If you work for a multinational company, you can expect that headquarters management is already issuing directives to the local senior Japanese team to tighten up their operations and preserve profits while reducing costs. This will almost invariably mean at worst a series of layoffs or voluntary retirements, such as being offered by Nikko Cordial to all its employees aged 40 or over, or at best a ban on paid overtime, reduced bonuses, and a general pay freeze. In short then, this is not a good time to be asking for pay rises.

If you’re working for a Japanese company, then you’re probably making less than your foreign company compatriots anyhow, and your bonuses and overtime are more of a natural extension of that missing salary. For Japanese firms, I expect that the bonus payments at the end of this year will be the same or slightly lower than usual, but will become much, much tighter next year. Of course this depends on what kind of Japanese company you’re working for. If you’re at a massive brand-name exporter, then with a few exceptions your company is probably still quite liquid and should be in reasonably good financial condition for the next 12 months. However, if you’re in more of a domestic firm that didn’t get to see the good times over the last 4 years, then things will definitely be more grim.

Against this backdrop, then, I expect that general annual pay increases will be 1% to 3% in healthier foreign companies, and those automatic increases based on seniority pay tables in healthy Japanese companies will either be slowed down or the pay system will be quickly changed to “performance pay.” As 2009 grinds on, if the number of Japanese jobless starts to rise quickly, or goes above 6%, then there will be a lot more pressure on employers to reduce staffing levels. In this case I expect a quicker implementation of what happened in the late 1990’s, where the major Japanese manufacturers started offering mass early retirements to those over the age of 40 or 45. In some of the bigger companies the numbers laid off this way were in the many thousands.

For those of us working for smaller companies, the changes will be more specific to the conditions of your company, rather than the market at large. To figure out where your company is going, just look at whether it is making a profit or not. Although you may not have access to the financials, most managers, if asked, will at least tell you if the company was in the red or black last month. What you do not want to hear is that your company has been in the red for more than 3 months in a row unless there is some specific strategy for doing so (like they are still in start-up mode or are working on the front edge of some capital intensive project).

The way to not become “collateral damage” over the next 12 months is to observe the following simple rules for survival:

  • Make sure that your contribution to the company has specific financial value attached to it. If your contribution doesn’t have a bottom-line angle, your job may be in danger.
  • Show flexibility and understanding if you are asked by your manager to change your job description. It is inevitable that more staff will be asked to get involved in sales and marketing work.
  • Be patient in regards to pay raises, 2009 is not the year for big financial commitments by employers.
  • Work on improving your skill set so that you become progressively more valuable to the firm. It could be that you won’t be financially recognized for your new skills - but try to put up with it for the next 12 months or go find another job.
  • Try to understand the pressures your manager must also be under, and help them out if you can. This small investment in goodwill may yield good returns if that manager later has to choose which employees to keep and which to put on early retirement!