Model Perspective

Oct 12, 2026 · Industry Insights

Why Labor Shortages Kill Some Firms While Others Raise Wages: Japan's Paradox

Analysis of Japan's simultaneous record corporate bankruptcies and acute labor shortages reveals that rising wage demands eliminate firms unable to afford market-rate labor, while productive firms gain advantage; a simple cost model shows how higher employment costs squeeze marginal businesses, and BOJ research suggests wage flexibility alone cannot instantly reallocate workers across skills and regions.