A panel of the Central Minimum Wage Council, an advisory body for the health, labor and welfare minister, on Aug. 6 recommended that the minimum hourly wage be raised by ¥14 on average to ¥763.
This will be the first time that the minimum hourly wage is raised by ¥10 or more since it was raised by ¥17 in 2010. The recommendation is a tiny step in the right direction at a time when the nation needs wage increases to get out of a long period of deflation and to ensure a steadfast economic recovery.
The Abe administration hopes that a raise of the minimum wage will lead to expansion of consumption, and thus to sustainable economic growth. Although Prime Minister Shinzo Abe cannot tell the panel what to do, the panel apparently felt pressure from the administration. The ¥14 raise is an increase of about 2 percent, which roughly corresponds to the Abe administration’s goal of attaining wages hikes of 2 percent or more.
But the increase is so small that it’s possible that it will be offset by price rises of consumer goods. The prices of some food items, gasoline, city gas and electricity are rising because of increased import costs of some resources attributable to the cheap yen policy of the Abe administration and the Bank of Japan.
Another problem is that a gap in the minimum wage level between urban and rural areas is widening. The minimum hourly wage in Tokyo is currently ¥850 while that in Shimane and Kochi prefectures is ¥652. Based on the panel’s recommendation and taking local conditions into consideration, local councils will decide on the actual minimum wage level for each prefecture. The new minimum wage will take effect around October.
It is hoped that if necessary, local councils in rural areas will raise the minimum hourly wage by more than the ¥14 margin recommended by the panel of the Central Minimum Wage Council. Otherwise, the outflow of workers from rural areas to urban areas could accelerate.
The government must recognize that both regular and irregular workers whose wages are just above the minimum wage level are in dire financial straits. At an hourly wage of around ¥650, a full time worker will get a take-home monthly pay of only about ¥110,000. Workers at a facility helping disabled people in Sendai, for example, get an hourly wage of about ¥750, higher than the minimum wage of ¥685. But their take-home pay is only about ¥130,000.
At the same time, small businesses facing financial difficulties will have a hard time meeting the minimum wage requirement. The government should help them find ways to increase the efficiency of their operations so that they can reduce overall costs.
The increase in the minimum hourly wage should remind company executives of the importance of their striving to improve labor productivity so that they can raise wages without reducing the number of people on their payroll. If companies rely on cutting wages and firing workers to improve their bottom line, the Japanese economy will suffer as a whole and its nascent recovery will stall.