Setting a living wage

A ¥16 hike in the nation’s average minimum hourly wage to ¥780, recommended by an advisory panel to the labor minister this week, fails to make up for the rising costs of living and is far insufficient for the system to function as a safety net for the growing ranks of irregular workers.

The decision by the Central Minimum Wage Council, in which business and labor representatives huddled until the last minute over the margin of the increase, will push up the minimum wage by double-digit figures for the third straight year. The raise takes effect in October.

The minimum wage is expected to exceed the level of livelihood protection provided by welfare benefits in all of Japan’s 47 prefectures, including Hokkaido, Miyagi, Tokyo, Hyogo and Hiroshima, where, at present, benefits received by people on welfare exceed the minimum-wage income of workers after tax and social security premiums are deducted.

This is a problem that the government has been trying to eliminate for years, as it is considered a “moral hazard” for both workers and welfare beneficiaries.

The minimum wage, which will later be set differently for each prefecture on the basis of the council’s annual recommendation, mostly affects irregular workers such as part-timers whose ranks have increased to roughly 19 million — or close to 40 percent of the nation’s employed workforce.

Many of these workers are not represented by labor unions and have not benefited from the steep wage hikes offered to full-time workers at major companies this year.

According to 2012 OECD statistics, Japan’s minimum-wage level relative to the median wage of full-time workers was the lowest among industrialized economies — along with the United States. Japan’s minimum wage is also the lowest among industrialized nations in inflation-adjusted terms.

In the U.S., President Barack Obama signed an executive order in February to raise the minimum hourly wage of workers under federal contract from $7.50 to $10.10, and has pushed Congress to take legislative action to raise the minimum wage for all American workers.

With the economic upturn and tightening labor demand in certain sectors, companies are already starting to offer higher wages to part-time staff to secure necessary manpower. However, it’s believed that many irregular workers are still paid no more than the minimum wage or an amount close to it.

For minimum-wage workers, the latest hike represents an increase of about 2 percent. Given that consumer prices have been rising by 3 percent or more since April because of the consumption tax hike and rising energy costs, the minimum-wage hike will not eliminate a net decline in their income.

The Abe administration, which earlier urged major companies whose earnings improved on the back of the yen’s fall to raise employees’ pay and went as far as to pressure some reluctant firms, had expressed the hope that the minimum-wage hike would at least exceed last year’s margin of ¥15.

While labor representatives on the wage council called for a large-scale hike, business representatives were reportedly opposed, saying that small- and medium-size companies — those most likely to hire workers at or close to the minimum wage level — continue to face tough times despite the economic upturn, especially in rural parts of the country.

Regional disparity in minimum wages remains steep. Based on the council’s recommendations, the minimum wage in each prefecture will be decided after the region’s economic conditions and prices are taken into account.

In fiscal 2013, the minimum wage was the highest in Tokyo at ¥869 and lowest — at ¥664 — in nine prefectures including Tottori and Shimane.

The gap also reflects differences in the size and earnings of businesses in each region. The gap is not likely to close soon, and it could become wider if the situation is left as is.

Workers migrate to big cities in pursuit of better jobs with higher pay, resulting in the continuing exodus of the young population from rural to urban Japan. Discussions about the minimum wage in each prefecture should take this into account and try, at least, not to exacerbate the gap.

  • Mike Wyckoff

    Those folks in Seattle are rich by comparison.