Last month, Prime Minister Shinzo Abe’s Council on Economic and Fiscal Policy recommended that the government draw up detailed measures to bring the nationwide average minimum wage up to ¥1,000 per hour as soon as possible.
According to an article in the May 15 Asahi Shimbun, the recommendation could cause some concern since the government is anxious about the instability of the business environment owing to factors such as the ongoing U.S.-China trade tensions, and increasing the minimum wage too quickly may place an unwanted burden on small and midsize companies.
In 2015, the Abe administration said it would aim to raise the average minimum wage nationwide by 3 percent every year — — although the government has no direct way to enact such changes — and by 2018 this average had increased to ¥874 an hour. At this pace, it will be another five years before the minimum wage reaches ¥1,000. According to the Asahi, some members of the panel said the goal should be pushed up, because it is important to expand consumption. Abe in turn instructed the labor ministry to report on what it plans to do in response to the panel’s recommendations.
The recommendations come at a delicate time for other reasons.
Recently, the government liberalized immigration laws to make it easier for foreigners to work certain jobs in Japan, and there is a palpable fear that the imbalance in wages between urban and rural areas will cause many of these workers to gravitate to big cities for higher pay.
In addition, the consumption tax is scheduled to rise from 8 percent to 10 percent this fall, and the government is on edge over fears that even the slightest shock to the system could trigger a recession similar to the one from the last tax hikes in 1997 and 2014. Rumors have been swirling for months that the tax hike may be postponed for a third time, especially in light of the Upper House election scheduled for this summer.
At the same time, the business community is trying to forestall any more increases in the minimum wage, though, in truth, that is what the business community does out of habit.
The head of the Japan Chamber of Commerce and Industry, Akio Mimura, has said that the panel’s recommendation would have a seriously negative effect on small and midsize businesses, and, according to an article in the online magazine Buzzap, he plans to make this argument to the government.
He believes the economy can tolerate annual wage increases of up to 1.4 percent, but as Buzzap points out, anyone earning ¥1,000 an hour would make, before taxes and social security payments, about ¥1.92 million a year — the equivalent of ¥160,000 a month, the figure for a living wage for a single-person household according to government data. It’s almost as if Mimura is saying that the 1.25 million small and midsize companies that belong to the organization are unable to pay a living wage.
Overall, there are 3.82 million small and midsize companies in Japan, accounting for 99.7 percent of all businesses and 70 percent of the workforce. Of course, not all these workers are making only the minimum wage, but it does have an affect on their pay.
According to Garbage News, the average wage for male workers for companies with at least 10 employees in Tokyo last year was ¥1,366 an hour for men and ¥1,310 for women. That’s well above Tokyo’s average minimum wage of ¥985, but still low in terms of eking out a decent living.
With the government remains cautious on the issue, some employers have taken the initiative.
Yusaku Maezawa, the founder of online fashion retailer Zozotown, announced recently that he would hire about 2,000 new part-time workers for his warehouses in Chiba and Ibaraki prefectures with starting wages of ¥1,100 to ¥1,300 an hour, depending on how many hours are worked a week, plus bonuses of up to ¥10,000 a month. Previously, Zozotown paid ¥1,000 an hour for these jobs. Predictably, the company was flooded with applications — so many that Maezawa had to close the application process early.
According to the Tokyo Shimbun, Maezawa made this seemingly bold move in response to criticism of his extravagance. Last year, the flamboyant entrepreneur made a splash when he announced that he would be the first commercial passenger for a trip around the moon on Elon Musk’s SpaceX Starship, a distinction for which Maezawa reportedly paid ¥100 billion.
Maezawa is listed by Forbes magazine as earning the 18th highest salary in Japan, and groups that lobby for better pay have said he should be sharing more of his company’s wealth with his workers. Apparently, he took the criticism — much of it delivered via Twitter — to heart. Zozotown, after all, is dependent on the internet for its business and pays close attention to social media. However, Zozotown’s accounts last year showed their first dip in profits since its stock was listed, and the company’s share price consequently took a steep dive, so shareholders may only tolerate so much of an increase in wages.
And in truth, ¥1,300 an hour isn’t enough to make a living for someone supporting a family — usually defined as ¥2.6 million a year if we’re talking about a 40-hour work week — so it’s assumed that this is an “entry-level” wage, which gets to the heart of the minimum wage problem.
To many people, the minimum wage is a welfare issue, on a level of discussion with government assistance or subsidies for day care. Though some anti-poverty groups applauded Zozotown’s move, they admit it can’t address the underlying problem, which is a lack of collective bargaining power for laborers. Maezawa’s decision was made seemingly on a whim and did not involve any workers’ input. For wages to be meaningful, workers themselves must negotiate with management, and that is not happening among the majority of nonregular employees in Japan. Large companies have in-house labor unions, but the 70 percent mentioned above are mostly contract workers and part-timers with no collective-bargaining representation.
For that reason, the government may be the only entity that can offer a solution in the short run — a substantial raise in the legal minimum wage that would help push all wages up.
In a column that appeared on Feb. 8 in Toyo Keizai Online, businessman David Atkinson called on Japan to enact a national minimum wage. At present, each prefecture sets its own minimum wage under the idea that living standards differ from place to place. According to the International Labor Organization, only four countries in the world have exclusively regional minimum wages, but the difference between these three countries and Japan is the size of national land area.
In big countries, people don’t move easily to pursue higher pay. But Japan is relatively small. Everyone flocks to Tokyo because they can. Consequently, in Japan there is a great deal of economic imbalance depending on the region.
Atkinson also refutes the idea that higher minimum wages add to unemployment and points to the U.K. as proof. The U.K. didn’t enact a minimum wage until 1999, and it has progressively increased from £3.60 to £7.83 in 2018, when unemployment stood at 4 percent, the lowest since 1975.
The Japanese government tends to do what the business community wants — in this case, keeping a lid on wage increases — but it doesn’t take a degree in economics to know that consumption and investment would dramatically increase if people had more money to spend. And that’s what the government desires. More to the point, the labor shortage problem might be more easily solved if people were guaranteed more money.
According to a May 30 Asahi Shimbun report, the government also wants to monetarily encourage companies to hire as regular employees members of the so-called employment ice age generation who left school between 1993 and 2004. This group numbers 17 million, with 3.17 million in nonregular jobs and 400,000 unemployed and not even looking for work. These people are not paying enough into social security and will likely be on welfare when they become older. So the government — and the business community — has a choice. Pay now or pay later.
Yen for Living covers issues related to making, spending and saving money in Japan.