Govt gets its way on Japan’s minimum wage hike

Pool photo / The Yomiuri Shimbun
A government subcommittee discusses a proposal to increase the minimum wage during a meeting in Minato Ward, Tokyo, on Wednesday.

As the dust settled after a heated debate on Japan’s average minimum hourly wage, the administration of Prime Minister Yoshihide Suga appeared to have got what it wanted.

A Central Minimum Wages Council subcommittee agreed Wednesday on a proposal to raise the national average minimum wage by a record ¥28. Labor representatives had been demanding a ¥40 rise, while the management side had been pushing hard for no rise.

In the end, the subcommittee, an advisory panel to the health, labor and welfare minister, settled on ¥28 — a figure reflecting the Suga administration’s strong insistence that wages be increased. However, as the novel coronavirus pandemic rumbles on, the minimum wage hike alone will not power an economic recovery, so support for businesses will be essential.

A labor representative member of the subcommittee appeared relieved after the two-day meeting wrapped up. “This means the minimum wage will be above ¥800 in every prefecture. It’s a big step forward,” the representative said.

Minimum wage levels were essentially unchanged last fiscal year due to the impact of the unfolding pandemic. But this year, the labor side was determined to make sure that the pause was a one-off and sought an increase of ¥40. The labor side believed a hefty rise would help eliminate wage disparities between urban and rural areas, where the minimum wage remains lower, and dispel public anxiety.

The subcommittee’s management representatives, however, insisted wages should be kept at their current levels.

The management side felt that a recovery in business conditions remained a long way off for companies whose economic activity had been curtailed due to government requests to close and other measures implemented to combat the coronavirus.

The main thrust of this argument was that under the current circumstances, pushing up labor costs by increasing the minimum wage “could pull the trigger” for bankruptcies and permanent business closures.

Although both sides said the coronavirus was the reasoning behind their demands, their positions were diametrically opposed.

Election considerations

The labor side had some powerful support in its corner: the wishes of the Suga administration. Last year, the government said protecting jobs was the “top priority.” This time, the government was keen to rectify the wage disparities that had widened during the pandemic.

The new basic economic and fiscal policy guidelines adopted in June stipulated the government would make efforts to have wages increased this year, based on the track record from the years before the pandemic struck.

Average minimum wages increased by about 3% for four consecutive years through fiscal 2019, which ended in March 2020. The new guidelines were, in essence, hinting at an increase of about 3%, or about ¥25, for this fiscal year, too.

The government, which does not want the trend of people moving to regional areas amid the pandemic to end, might be aiming to improve labor conditions in those areas through the wage hike.

In addition, the start of COVID-19 vaccinations this year has raised the prospects for fully reopening the economy.

The House of Representatives election is scheduled to be held by this autumn. The government clearly hopes that a positive mood triggered by the wage increase will attract the public’s interest ahead of the poll.

Panel not unanimous

Labor and management were unable to bridge the gap between their positions during two days of discussions, which resulted in the unusual vote being held. A subcommittee member representing the interests of the public floated a proposal intended to take into account the views of both sides, namely an increase of ¥28. This figure, which was broadly in line with the government’s wishes, was tough for the management representatives to swallow.

“Our perceptions on the current state of affairs are vastly different,” a management participant said, ahead of the vote.

The 12-member subcommittee comprises four members each from labor and management, and four representing the interests of the public.

One management representative was absent from Wednesday’s meeting, which consequently had 11 attendees.

The proposal to increase the average minimum hourly wage by ¥28 got the green light after it received only two votes against it, both from management representatives.

One participant from the management side looked worn out after the meeting. “It’ll be too late to help once people start losing their jobs. Why couldn’t the other side understand this?” the management representative told The Yomiuri Shimbun.

A joint statement criticizing the decision to settle on the ¥28 increase was issued Wednesday by three industry bodies representing small and midsize businesses: the Japan Chamber of Commerce and Industry, the Central Federation of Societies of Commerce and Industry, and the National Federation of Small Business Associations.

Labor economics expert Prof. Daiji Kawaguchi of the University of Tokyo said: “If the minimum wage continues to be lifted at random in line with the government’s plans, at some stage it really will start to have a negative impact on employment. It’s essential that the effects and impact caused by the increase are carefully examined and the findings used in next year’s discussions.”