Spare a thought for smaller firms in light of minimum wage hike
To shore up consumption and help the economy finally shake off the shackles of deflation, it is vital that wages are raised.
The Central Minimum Wages Council, a panel of the Health, Labor and Welfare Ministry, has agreed to recommend that Japan’s minimum hourly wages for fiscal 2014 be increased by ¥16 on average from the previous year.
This would be a double-digit increase for the second consecutive year, and is expected to bump up the average minimum hourly wage to ¥780. In response to this recommendation, committees in prefectures across the nation will make final decisions on the increase to ensure the minimum wage fairly reflects local conditions. The new standards will be adopted in or around October.
Currently, after-tax income earned by a worker on the minimum wage is less than they would receive in welfare benefits in Tokyo, Hokkaido and three other prefectures. This so-called reversal phenomenon, in which welfare benefits exceed the minimum wage, can deflate a worker’s incentive to keep working, a development that is rightly viewed as problematic.
The latest hike in the minimum wage is forecast to resolve this problem in all five prefectures—a development we warmly welcome.
The monthly income of a full-time worker earning the minimum wage will rise by an average of ¥2,500. With the increase of nonpermanent workers in recent years, many households whose breadwinner is on the minimum wage are barely making ends meet. The value of lifting the minimum wage is considerable.
It is a fact that Japan’s minimum wage is among the lowest of advanced nations.
Buoyed by increasing signs of an economic recovery, this year’s shunto spring labor-management wage negotiations generated a wave of wage hikes, mainly for regular employees of major companies. However, amid rising prices and April’s increase in the consumption tax rate, the income for household budgets is effectively shrinking.
For nonregular workers and employees at small and midsize companies, moves toward wage increases have been lukewarm.
Share the benefits around
There is growing frustration that the benefits of Abenomics, the bold economic policies of the administration of Prime Minister Shinzo Abe, are not reaching every corner of society.
The proposed hefty minimum wage increase appears to reflect the strong desire of the administration to haul the economy out of deflation. Health, Labor and Welfare Minister Norihisa Tamura had called for an increase in minimum wage “equivalent to last year’s rise, or higher.”
In recent years, more young people have been working in nonregular jobs and earning minimum wage. There has been a noticeable increase in people giving up on getting married and having children due to their financial situations. This has been a major factor in the accelerating decline in the population due to the nation’s low birth rate.
Raising the minimum wage is thus also vital from the perspective of countering the falling population.
The public and private sectors should make efforts to ensure higher wages also spread to nonregular workers and other employees.
There are concerns that raising the minimum wage could put a squeeze on the management of small and midsize businesses. Many of these companies are already enduring tough financial conditions as they bear the brunt of soaring fuel and raw material costs due to the weaker yen.
Simply telling these companies to boost wages could worsen their business performance even further. There are also fears that negative consequences, such as companies laying off employees, could escalate.
We think the government should keep a close eye on the actual state of small and midsize companies and prepare effective assistance for them, such as supporting their moves into sectors where growth is anticipated.
(From The Yomiuri Shimbun, July 31, 2014)