Wage increases, or "base-up" adjustments, have become a hot topic. In 2024, the wage hike rate reached a remarkable 5.17%, the highest level since 1991. While this may appear to signal better living standards, the reality is that rising costs and tax burdens often overshadow these benefits.
This article explores the potential of dividends as a complementary approach to achieving financial stability, beyond relying solely on wage increases.
1. Current State and Limitations of Wage Increases
1.1 Why the Benefits of Wage Increases Are Limited
Limited Increase in Take-Home Pay
Even if wages increase by ¥10,000 per month, taxes and social insurance premiums reduce the actual take-home amount to around ¥7,000–¥8,000. For instance, an annual salary increase from ¥4 million to ¥4.1 million might only result in about ¥6,000 more in take-home pay (Japan Pension Service).
Rising Costs and Household Burdens
Consumer prices rose by 2.9% in 2023 (Statistics Bureau of Japan). Here’s how this has affected my household:
- Weekly grocery expenses: ¥8,000 → ¥10,000 (Annual increase: ¥104,000)
- Gasoline costs: ¥8,000/month → ¥11,000/month (Annual increase: ¥36,000)
In such scenarios, the extra income from wage increases is often offset by higher living costs, making it challenging to see real improvement in living standards.
2. Dividends as a Complement to Wage Increases
2.1 The Appeal of Dividends
Dividends are a form of income generated by investments, offering a stable cash flow independent of labor.
Examples:
- A 4% dividend yield on a ¥1 million investment provides an annual income of ¥40,000 (approximately ¥3,333 per month).
- Reinvesting dividends over 10 years can significantly grow your assets, creating a system less reliant on labor income.
2.2 Comparing Wage Increases and Dividends
| Aspect | Wage Increases | Dividends |
|---|---|---|
| Take-Home Pay | Reduced by taxes and insurance fees | Subject to favorable tax treatment |
| Growth Potential | Dependent on company performance | Grows automatically with reinvestment |
| Stability | Varies based on job security | Long-term stability through assets |
3. How Dividends Can Broaden Life’s Possibilities
Dividends provide more than just additional income—they create opportunities for personal and financial growth.
3.1 Investing in Qualifications
Here are qualifications I’ve obtained:
- FP Level 3: Enhanced my financial literacy for better household management.
- Hazardous Materials Handler (Class 4): Improved my career prospects.
- IT Passport: Built basic digital literacy for the modern workplace.
Next Goals:
- FP Level 2: Deepen knowledge of asset management.
- Securities Sales Representative: Sharpen investment expertise.
- Advanced Hazardous Materials Classes: Gain specialized skills.
Dividends cover the costs of exams and study materials, easing the financial burden of self-improvement.
3.2 Investing in High-Performance Appliances
One example is a high-performance washing machine (Panasonic NA-FA10K3).
By saving time and energy, this appliance allows me to focus on personal growth and family time.
3.3 Supporting Hobbies and Side Hustles
Dividends also enable me to invest in hobbies and potential income streams:
- Programming Courses: Learning coding skills for future side projects.
- Video Editing Equipment: Preparing to monetize my creative hobbies.
4. A Portfolio to Earn ¥10,000 Per Month in Dividends
Goal: Achieve a monthly dividend income of ¥10,000 (annual ¥120,000).
To achieve this, invest ¥4 million in stocks with a 3–4% dividend yield. Here’s a sample portfolio:
| Sector | Yield Range | Example | Allocation |
|---|---|---|---|
| Trading Companies | 4.0%–5.0% | Large firms with a history of increases | 20% |
| Telecom | 3.0%–3.5% | Stable, high-share telecom carriers | 20% |
| Finance | 4.0%–5.0% | Megabanks or insurance companies | 20% |
| Energy | 4.0%–5.0% | Oil and gas companies | 15% |
| Consumer Goods | 3.0%–3.5% | Resilient daily goods manufacturers | 15% |
| Infrastructure | 4.0%–4.5% | Leasing or infrastructure companies | 10% |
Tips for Research:
- Use stock screening tools (Morningstar).
- Check dividend policies and financial statements in company IR reports.
5. Conclusion: The Potential of Dividends for Financial Stability
Wage increases alone cannot fully address the challenges of rising costs. By complementing labor income with dividends, you can:
- Gain peace of mind with diversified income.
- Take on new challenges like qualifications or hobbies.
- Build household stability in the face of inflation and taxes.
5.1 References
- Ministry of Health, Labour and Welfare: Wage Increases
- Statistics Bureau of Japan: Consumer Price Index
- Japan Pension Service: Social Insurance Guidelines