The new minimum wage level for each of the nation’s 47 prefectures has been formally adopted and will take effect in October. The average margin of the year-on-year rise was the highest since the current method for setting the rates was adopted in 2002. It is hoped that the higher minimum wages will help improve the livelihood of workers at or near the bottom of the labor force in terms of compensation. The latest revisions also expose a widening regional wage gap — a problem that could exacerbate the population exodus to metropolitan areas.

In the fiscal 2015 revisions of hourly minimum wages, the national average went up by ¥18 to reach ¥798, higher than the ¥16 raise in fiscal 2014 and marking a two-digit increase for the fourth-straight year. The minimum wage varies from prefecture to prefecture and will be ¥16 to ¥20 higher from the previous year. In Tokyo and Kanagawa, the hourly minimum wage will top ¥900 for the first time.

With major companies earning record profits under the Abe administration’s economic policies, their workers have been awarded wage hikes topping 2 percent for the second year in a row. Still, such wage hikes have not taken place in many small and medium-sized companies, especially those outside the metropolitan areas, where “Abenomics” had the biggest impact. In view of this situation, raising the minimum wages is necessary to achieve broad-based pay increases, which should in turn help expand consumer spending.

Many irregular workers — which have come to account for nearly 40 percent of the nation’s workforce — earn close to the minimum wage. The Abe administration should pursue effective policy measures to improve the conditions of irregular workers, whose ranks include millions of part-timers, and enhance their job security.

During discussions at the Central Minimum Wages Council of the Health, Labor and Welfare Ministry, representatives of labor organizations demanded that the average minimum wage be raised by more than ¥20, saying that the margin should be geared to wage hikes for employees at large companies. Representatives of business organizations opposed an increase that would top last year’s hike, saying sharp increases would cause financial difficulties for small companies in rural areas.

The guidelines adopted by the central council in late July divided the 47 prefectures into four categories depending on their economic condition and called for a raise of ¥19 for the first category, ¥18 for the second category and ¥16 for the third and fourth categories. Then the minimum wage council in each prefecture decided on the actual raises on the basis of the guidelines. Ten prefectures, including Osaka, Hiroshima and Iwate, set the minimum rate at ¥1 higher than the guidelines, while 36 others accepted the levels indicated by the guidelines. The number of prefectures that adopted higher raises than the guidelines specified has declined for three straight years.

The exception was Kanagawa, which set the level ¥1 lower than the guidelines, as its council considered the negative impact of the volcanic activities near the Hakone hot spring resort on the prefecture’s economy. It was the first time since 2009 that the minimum wage of any prefecture has been set below the central council’s guidelines.

An important consequence of the latest revision of minimum wages is that the gap between the highest-paying area — Tokyo at ¥907 per hour — and the lowest-paying four prefectures, including Okinawa and Tottori, at ¥693, expanded to ¥214 — twice the amount of a decade ago. Wage disparities between major urban areas and other parts of the country will likely accelerate the exodus of workers from rural Japan to large megalopolis areas. To slow the population flight, especially to Tokyo, the government, businesses and labor organizations must figure out how to enhance economic activities and boost wage levels in rural areas.

At the same time, hikes in minimum wages could place further strains on small businesses in rural areas with shrinking populations. Higher personnel costs could cause difficulties for their operations, and in the worst cases force them to reduce hiring or to layoff workers. The Abe administration, which has identified regional revitalization as a key policy goal, should enhance measures to support industries and companies in regions outside the metropolitan areas.

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