Strike good balance between raising minimum wages, securing jobs

It is important to preserve employment while raising wages as much as possible. The government should implement all possible measures to support small and midsize companies.

The Central Minimum Wages Council of the Health, Labor and Welfare Ministry has drawn up a proposal for this fiscal year’s minimum wages, setting a target to raise the national average hourly wage by ¥28 to ¥930. This is said to be the largest increase on record.

Since the administration of former Prime Minister Shinzo Abe, the government has aimed to boost minimum wages to a national average of ¥1,000 at an early date. Last fiscal year, a target was not specified out of consideration for the impact of the novel coronavirus pandemic. However, this fiscal year, this stance was changed, returning the target for minimum wage hikes to the pre-pandemic level.

The council said it concluded that the situation is different from last year’s, as economic indicators have shown improvement and vaccinations have progressed. A council member from the management side opposed the move, saying, “Our perceptions of the current situation differ.” As the management side has not reached a consensus during discussions with the labor side and experts, the council ended up holding the unusual vote.

The intention to raise the level of wages is reasonable. The livelihoods of non-regular workers have become more severe. If their incomes increase, the economy also can be revitalized by the resulting expansion in consumption.

Minimum wages in Japan are lower than in other major developed countries. Britain, Germany and France have raised their minimum wages to around ¥1,300, even during the pandemic. The council appears to have taken this trend into consideration.

The issue is how much minimum wages will be raised and when to do so.

The restaurant and hotel industries, among other sectors, remain in dire straits. Their situation is particularly serious in regional areas. If companies become unable to cope with wage hikes and are forced to cut their workforce or go bankrupt, jobs will be lost.

Some experts argue that small and midsize companies with low productivity should be eliminated or consolidated through a drastic increase in minimum wages. Unless new jobs are created, this could increase unemployment and undermine social stability.

Business organizations, including the Japan Chamber of Commerce and Industry, released a joint statement that the proposed minimum wage hike would have “a serious impact on employment.” This concern should be taken seriously.

The government has launched a system to provide a subsidy of up to ¥4.5 million to small and midsize companies that have made capital investments in tandem with increasing wages. However, the procedures to receive this subsidy are complicated, and use of the system has been sluggish. The government is urged to reduce the paperwork to enable companies to use the system easily, while also considering boosting the subsidy amount.

Besides financial assistance, it is also crucial to create an environment in which wage increases are made possible by strengthening the financial foundation of small and midsize firms, through such measures as encouraging them to use information technology and advance into growth fields.

— The original Japanese article appeared in The Yomiuri Shimbun on July 18, 2021.