Talks on minimum wage hike likely to have rough going

The Yomiuri Shimbun

15:42 JST, June 29, 2022

An increase in the minimum wage to offset rising consumer prices seems like a foregone conclusion. But a fierce debate can be expected over how much to increase the mandated hourly wage.

Discussions began for this fiscal year on Tuesday at the Central Minimum Wages Council, an advisory panel to the labor minister.

In light of the economic recovery as the pandemic comes under control and the impact of runaway price increases, labor representatives are expecting a generous boost in the minimum wage from the current national average of ¥930.

The government, for its part, is targeting a quick bump up to ¥1,000 or more, but the management side has strong concerns and will likely make for rough going in the negotiations.

Continual 3% increases

“As we aim to realize an average minimum wage of ¥1,000 nationwide as early as possible, I would like to ask you to engage in solid discussions,” Health, Labor and Welfare Minister Shigeyuki Goto said at the beginning of a subcommittee meeting of the council, held at the ministry in Kasumigaseki, Tokyo.

Among the panel members were representatives of both labor and management, along with scholars and other experts on the matter.

The minimum wage is ultimately set by each prefecture. Increases are first submitted by the subcommittee of the Central Minimum Wages Council as a yardstick to the labor minister in July. Based on the proposal, the wage council of each prefecture comes up with a specific minimum wage which comes into effect around October.

From fiscal 2016 to fiscal 2021 during the previous administrations of Shinzo Abe and Yoshihide Suga, the minimum wage was raised annually by around 3%, or ¥25 to ¥28, with the exception of fiscal 2020, when it was increase by just 0.1%, or ¥1, due to economic disruption of the COVID-19 pandemic.

This fiscal year, Russia’s invasion of Ukraine and other factors have sent prices for raw materials soaring and stagnation in global distribution, causing a ripple effect that is hitting general households hard.

Taking soaring prices into account, the labor side is set to demand a large minimum wage hike at the council.

Concerns from management

The major political parties advocate increasing the minimum wage in their platforms for the House of Councillors election on July 10. But with that “pressure” for a wage hike has come voices of confusion from the management side.

International Diamond Inc., a company based in Tokyo’s Ota Ward with 38 employees, manufactures the diamond tools used by automobile part makers and others. In addition to decreased orders during the pandemic, the company has seen its electricity costs soar in line with energy prices, leaving it in a harsh economic situation.

“Not only is our future uncertain, now raising the minimum wage will make it even tougher, to be honest,” said Kuniyasu Eguchi, the company’s 56-year-old president.

No numerical target

Last fiscal year, the council went through the rare development of having the proposed hike put up for a vote among its members, after some management side representatives, including from the Japan Chamber of Commerce and Industry, opposed a large increase.

The government, engaging in “self-reflection” for having invited sharp conflict between the labor and management sides, refrained from setting a clear number for the wage increase among its announced policies for this year.

But as long as there are industries that have not seen a recovery of demand to pre-pandemic levels, the management side is expected to take an anxious stance against any large wage increases, making it likely to complicate matters in the council.