Nearly 10% of Japanese firms said they will hire more regular workers as a result of planned minimum wage hikes across the country, a recent survey by a credit research company showed.

The survey by Tokyo Shoko Research appears to show that more employers are deciding it’s better to shift their labor force to nonfixed-term regular workers, given that it would be more costly for them to employ fixed-term, nonregular staff who are paid by the hour.

When asked about the impact of the minimum wage rise scheduled for October, the online survey found that 914, or 9.8%, of the 9,278 responding firms said they will hire more regular staff, while 287, or 3%, will reduce their headcount of such workers.

A total of 7,745, or 83.4%, said the minimum pay increase will not affect their employment strategy, according to the survey conducted from Aug. 2 to 11. The trend was more notable among big companies, as the percentage in large firms was 89.7%, compared to 82.3% in small and midsize businesses.

The results came after a government panel proposed in July raising the average hourly minimum wage in fiscal 2021 by ¥28 to ¥930, the highest level since fiscal 2002, when it began using an hourly wage to propose a rough target for pay hikes.

The proposal was concluded after intense debate between the management and labor representatives, with the management side fearing the wage hike could deal a further blow to businesses already hurt by the economic fallout from the coronavirus pandemic.

The sharp wage hikes came after the average minimum wage inched up by just ¥1 in fiscal 2020 amid concerns that wage hikes could worsen business conditions amid the pandemic.

Taking the proposal and local economic situations into account, each of the labor ministry’s regional bureaus in the 47 prefectures finalized the hike individually by mid-August.

Tokyo Shoko Research said companies with strong business performances may “shift to hiring more regular employees” instead of hourly workers such as temporary employees and part-timers, citing Japan’s longtime labor shortage accompanied with its rapidly graying population.

“The result suggests more firms are changing their mind and trying to improve productivity per worker under long-term and stable regular employment, inspired by the minimum wage hike,” said Hisashi Yamada, vice chairman of think tank Japan Research Institute.

Yamada said the possible negative impact of the minimum wage hike on corporate management seems “not that big on the whole since over 80% expect no impact,” but warned that small and midsize firms, which generally hire more nonregular workers, would suffer from higher labor costs in addition to the virus fallout.

“Basically, many midsize and small businesses are financially unstable and more vulnerable to pay hikes, so some sort of supportive measures will be required when taking into account the current virus situation,” Yamada said, proposing to introduce exemptions from the wage hike for pandemic-hit sectors such as service providers.

The wage floor increase came as Prime Minister Yoshihide Suga has vowed to achieve an average hourly rate of at least ¥1,000 “as soon as possible” to help nonregular employees earn more and correct wage disparities between them and regular workers.

Japan’s minimum wage ranks fifth among the Group of Seven industrialized nations, after France’s $12.20, Germany’s $12.00, Britain’s $11.10 and Canada’s $10.50, according to OECD data for 2020. The United States is the lowest at $7.3, while Italy doesn’t have a minimum wage.

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