The shakeout of small and medium-sized enterprises that cannot “raise wages” is likely to accelerate by 2025.
Of the 342 cases of labor shortage bankruptcies identified in 2024, 87 cases were found to be “employee retirement-type” bankruptcies, which were caused directly or indirectly by the resignation of employees or senior management. That’s an increase of 20 cases, or nearly 30 percent, from the previous year (67 cases), significantly higher than 2019 (71 cases), when labor shortages peaked in many industries, and the highest number since 2013, when the data was compiled.
By industry, the largest number of “employee retirement-type” bankruptcies in 2024 was in the service industry (31 cases), accounting for 35.6% of the total. It was the first time in five years since 2019 that the service industry accounted for the largest number of bankruptcies among all industries. Software development and other IT industries, as well as temp agencies, beauty salons, and nursing homes, all of which tend to have lower retention rates than other industries and experience labor shortages, are particularly common.
The next largest number of cases was in the “construction industry” (18 cases), where the retirement of employees with qualifications essential for business operations, such as designers and construction supervisors, made it difficult for companies to operate their businesses. The “Manufacturing” and “Transportation/Telecommunications” sectors had more than 10 cases per year for the first time, with a string of cases in which businesses were unable to operate due to the retirement of factory workers and drivers.
Recently, employees who are struggling with prolonged price hikes are increasingly calling for wage increases. In response to this trend, consideration of continuous wage increases has spread from large companies to small and midsize firms. On the other hand, there are many small and medium-sized firms that want to raise wages but are unable to do so due to a lack of profitability, and the response to wage hikes is becoming increasingly polarized.
However, as the mobility of human resources increases against the backdrop of a severe shortage of workers, the “risk of not improving compensation” is increasing, especially among small and medium-sized companies, as executives and employees who are fed up with unsatisfactory wage increases and management that is reluctant to improve compensation are resigning. As the trend of attracting good talent with high salaries through wage increases spreads through the labor market, there is a growing possibility that the number of “wage hardship bankruptcies,” in which employees quit due to unsatisfactory wage increases, will increase in 2025.
