The Abe administration’s much-touted plan to promote the “dynamic engagement of all citizens” — whether or not it’s aptly named — seems to set a correct policy direction. Calling Japan’s aging population and low birthrate a root cause that hampers economic growth, the plan says it will achieve a “virtuous cycle of growth and redistribution” by bolstering the foundations of social security systems to encourage people to spend more. It calls for increased wages for the growing ranks of irregular workers and raising legal minimum wages, and providing better child-care support and elderly nursing-care services to make the most of the nation’s labor potential.
Few would object to much of the wide-ranging agenda laid out in the plan. The question is how seriously the government is committed to implementing the policies. Some of the policy goals lack concrete details on how they will be achieved, others are not accompanied by plans to finance them, while still others are mentioned as subjects for future consideration.
Redistribution policy used to be more a trademark of the opposition parties, and Prime Minister Shinzo Abe’s newfound emphasis on these topic — after more than three years of his generally business-friendly policies — has invited questions whether it’s a tactic to defuse potential campaign issues ahead of the Upper House election this summer. Since the plan is billed as a road map of policies for the coming decade, the proposed measures must not end up being merely a campaign ploy but be steadily implemented over the long term. How the government follows through on the promised steps needs to be closely monitored.
The plan unveiled last week, according to the administration, is meant to flesh out the “new three arrows” (or in fact targets) that the prime minister set out last year: boosting Japan’s nominal gross domestic product to ¥600 trillion, raising the fertility rate to 1.8 and eliminating the need for people to have to quit their jobs to care for ailing relatives.
Among other things, the plan attempts to tackle the steep wage gap between regular full-time corporate employees and irregular workers, such as part-timers and temporary contract workers — a problem that carries serious implications for the economy as irregular workers now account for 40 percent of the nation’s labor force. The average pay for irregular workers is reported to be about 60 percent of the level of their regular full-time counterparts. The plan calls for closing the gap to 80 percent — a level seen in many European economies — by amending labor laws in three years to prohibit irrational discrimination in wages due to differences in employment status.
How effective such steps will be in actually closing the gap, however, is another question. It may depend on how “irrational” discrimination will be defined in the laws. Progress might have to wait for lawsuits to be filed over possible wage discrimination and court decisions to be established regarding under what circumstances the differentiated wages will be deemed irrational. Questions remain on how the “same work, same pay” principle behind the drive will fit in with Japan’s prevalent labor practices, including the seniority-based wage system at many firms. Details still need to be worked out to ensure that the target will be achieved.
Earlier the government established a plan to increase the capacity of day-care services for children and nursing care for the elderly by 500,000 people each by 2017. In response to criticism that building more facilities could exacerbate the already serious manpower shortage, the latest plan calls for raising the monthly wage of nursery school teachers by ¥6,000 and that of care workers for the elderly by ¥10,000, both beginning in fiscal 2017. But while this is a rare area in the plan that actually includes specific figures and a timeline, it is questioned whether the raises would be enough to recruit a sufficient number of workers in a field that suffers from a chronic staff shortage due to monthly wages that are estimated to be ¥100,000 below all-industry average.
The government’s Council on Economic and Fiscal Policy, in its draft policy guideline also unveiled last week, calls for utilizing the “fruits of Abenomics” — meaning increased tax revenue produced by the economy’s upturn — to pay for measures listed in the “dynamic engagement” package that will require fiscal backing, such as the improved conditions for nursing-care workers and nursery school teachers. However, such tax revenue can fluctuate in accordance with the economy’s ups-and-downs and seems to hardly count as a stable source to cover the cost of the measures, which need to be carried out for years to come. Whether the Abe administration can specify how it will finance the proposed measures going forward may indicate how committed it is to taking the promised steps.