This article examines the actual state of Japan's small and medium-sized enterprises and provides an international comparison to explain the background to the wage gap between large companies and SMEs. It also examines how differences in capital-based criteria and employee numbers are related, while shedding light on actual profit levels.
In Japan, small and medium-sized enterprises are defined as companies with capital of less than ¥50 million. Annual profit before tax is just ¥2.4 million for companies with capital of less than ¥10 million and ¥12.9 million for those with capital of ¥10 million to less than ¥50 million. These profit levels also raise questions about the incentive to incorporate.
Around the world, SMEs are more often classified by employee numbers than by capital. Data from the 2021 Economic Census show the relationship between capital and employee numbers, and indicate that some companies have many employees despite having relatively little capital.
The OECD defines SMEs as companies with 249 or fewer employees, which differs from the situation in Japan. A breakdown by employee-size category shows that employee numbers vary substantially according to capital size.
International comparisons, including the OECD definition, classify Japan as a country with a high proportion of SMEs. At the same time, the background to Japan's wage gap may include the distribution of companies by employee size and disparities in profit levels.