Engineering Salaries in Japan
The starting pay for an Engineering graduate (Masters) is approximately $2,200 / month. Japanese companies pay out salary bonuses twice a year valued at 1 ~ 3 months worth of pay. Assuming that I get 5 months worth of bonuses, the total works out to about $37,400 yearly. In addition, Japanese companies usually provide dormitory housing for their engineering employees at a very cheap rate, somewhere in the ball park of $150/month. Depending on the region, rent can cost in the ball park of $500 to $700. Let's assume I save $400/month in rent leading to $4,800 in savings. The starting benefits a starting engineering person receives is in the ball-park of $40,000/year.
According to the numbers I have found on the net at www.payscale.com, Electrical Engineers with 1~4 years of experience make $56,000/year. There is a $16,000 discrepancy between starting Japanese salaries and Canadian salaries.
The discrepancy comes from the attitudes of Japanese companies that recent graduates need to be retrained to be able to work for the company. They don't assume you have any skill and will proceed to train you for approximately a year. I am not particularly happy with that kind of mind set, so it will be in my best interest to find a company that operates on the concept of a meritocracy (people are paid increasingly with skill or productivity). I have heard that foreign companies are best for this kind of mindset.
I would like to stick around Japan for a few years and eventually reposition myself back into Canada or a westernized country for the long term. The asian work ethic of just working perpetually hard does not seem appealing to me (especially with poor incentives). However, I do value the international experience and my ability to live in a different country. Perhaps for external reasons, one day we might find ourselves required to relocate to different parts of the world to pursue opportunities in different countries that offer them.
Taxation in Japan and Canada
I've spent the morning comparing taxation rates between Canada and Japan. Unfortunately there is little published information online except for the raw marginal tax rates offered in both countries. I have decided to run calculations to determine the percentage of money a person pays depending on yearly income.
The calculations for Canadian taxes was based on information provided by a government of Canada website located here and is current for 2007. The Japanese marginal tax rate information was calculated from here and is also current for 2007.
2 calculations were performed, one calculation accounting only for income taxes and a second calculation including sales tax. It is important to note that Japanese sales tax is 5% and Canadian sales tax in BC is 14%, meaning that sales tax does have a significant effect on the purchasing power of money. The calculations were performed in Excel and the the following graph below was produced (click on the image for a larger view).
Graph of percent income paid as tax as a function of income and also the adjusted amount of tax paid accounting for sales taxes.
Without accounting for sales taxes, it is quite obvious that Canadian taxes are lower then that of Japanese taxes. The Japanese system taxes people at 33% to 40% in the upper tax brackets of above $90k and $180k respectively. In addition to these taxes, when you get into the higher tax brackets, you are also charged a flat lump sum fee dependent on the tax bracket which accounts for the "steps" seen in the Japanese tax graphs. It is also quite evident that Japanese people pay more taxes when in tax brackets above the $80,000 mark.
When the purchasing power of money is accounted for after the addition of sales taxes for both countries, the tax rates in Japan is cheaper compared to Canada when earnings are below $60,000, above that, the Japanese tax system becomes more expensive. In the range between $40,000 to $60,000 the difference in taxation between the 2 systems is negligible. Unfortunately, this data doesn't tell the whole story.
In the Canadian system, (if you make more than $30,000) you have more cash on hand before being hit with the sales tax, this is advantageous if you plan to move money out of a country because the money isn't heavily taxed unless you spend it in the country. In the Japanese system, you are more heavily taxed on your income leaving resulting in less cash on hand.
The conclusion to this analysis is that if you're an Engineer, you're probably better off financially in Canada.
2 comments:
This graph looks wrong.
For example, why in Japan if you earned $100k you would pay more in taxes (percentage wise) than if you earned $150k?
I think you're confusing net tax rates and marginal rates.
When looking at the Japanese income tax guide there are quite a few rules that are different than here in Canada - for example, you can deduct life insurance premiums from income. Their basic exemption is lower (they have CAD$3700 while we have nearly $9000).
Does Japan have an equivalent of EI and CPP? Here in Canada it deducts about 6.8% off the paycheque up to about $40,000 income.
And as a final note, I think the $56,000 estimate for an electrical engineer here is low.
The problem you mentioned about the higher percentage tax paid when going into a new bracket occurs as a result of a lump sum paid upon getting into that bracket from this webpage . That lump sum, causes the amount of money you pay to spike up initially and then decrease as you make more money.
Japan does have employment insurance and according to this webpage the employment insurance paid by an employee is 11.6%, this covers health insurance, pension insurance and unemployment insurance.
If this figure is included into the calculations, the taxation rate will significantly increases.
I will delve into this matter further.
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