Create An Environment That Facilitates Ongoing Increases

Boosting the minimum wage is essential to protect workers buffeted by high prices. The government must create an environment in which small and midsize companies can continue to increase remuneration.

The Central Minimum Wages Council of the Health, Labor and Welfare Ministry has compiled a guideline for raising the national average minimum wage from the current ¥961 to ¥1,002 per hour in fiscal 2023. This increase of ¥41 represents a more than 4% increase; both figures are unprecedented.

The minimum wage is the wage base that applies to all workers — regular or irregular. With prices rising at a rate exceeding 3%, hiking the minimum wage above the inflation rate will help protect employees’ livelihoods. This is of great significance.

This year’s spring labor-management negotiations saw a series of high-level wage increases. It can be said that this trend has spread to all workers.

During meetings of the council, the labor side insisted on substantially fatter paychecks against the backdrop of high prices, while employers sought a more modest increase, citing the soaring cost of raw materials. The talks were far from smooth.

In the end, the employers’ side agreed to a significant augmentation, likely considering Prime Minister Fumio Kishida’s view that the minimum wage must top ¥1,000 this fiscal year.

However, it is important to note that rapidly rising wages could have a negative impact on the business models of small and midsize companies. In order to cover labor costs, more firms will likely run out of funds for proactive investments in such fields as digitization and decarbonization.

A situation must be avoided in which the growth potential of small and midsize companies falls into decline, and as a result, such firms fail to raise wages. The government has provided subsidies to firms that have hiked pay and made capital investments — this support should be further expanded.

There is no end to the number of small and midsize companies being repeatedly blocked from passing on higher labor and other costs associated with wage increases to their major customers. This is a major reason why such firms are reluctant to elevate pay. It is vital for the government to thoroughly monitor the situation.

The minimum wage in each prefecture will be determined by regional minimum wage councils based on the central council’s guideline, which is due to be applied around October.

Currently, there is a more than ¥200 differential between Tokyo, which has the highest minimum wage, and such prefectures as Aomori and Okinawa, which have the lowest. The regional councils should consider augmenting their minimum wages in light of the guideline and try to narrow this gap as much as possible.

Japan’s minimum wage continues to lag that of Germany (about ¥1,750) and France (about ¥1,680). Continued efforts are required to raise remuneration if Japan is to attract more foreigners to work here.

(From The Yomiuri Shimbun, July 29, 2023)