Japan’s average hourly minimum wage is set to rise by another record amount as the government endeavours to support households in the face of persistent inflation and as it works to boost economic growth with wage-driven stimulus. A panel tasked with arriving at a target for the minimum wage has agreed to a national average increase of ¥50 ($0.30), the fourth record increase in as many years. Based on the target figure, each prefecture will determine how much it will raise its local minimum wage later this year. The current national average is ¥1,004, meaning it is set to increase by about 5% to just above ¥1,050.
The boost in pay comes as inflation outpaced wage growth for a record 26 straight months through May, and as families find it increasingly difficult to make ends meet. A period of dramatic weakness in the yen has only added to the problem, with the high price of imported goods further squeezing household budgets. “Upward pressure on wages continue to be strong,” Shinichiro Kobayashi, a senior economist at Mitsubishi UFJ Research & Consulting, said, citing labour shortages and sticky inflation. “It has become tough to attract workers unless they pay more than the minimum wage level.”
The 5.1% increase in wages negotiated during the spring offensive, which is mainly for larger companies but sets the tone for bargaining throughout the country, appeared to have been weighed heavily during the panel’s discussions, Kobayashi said. The panel members apparently had to spend long hours to reach a conclusion, highlighting the difficulty of balancing the plight of small companies and households. While the sharp increase will be a big boost for workers, smaller firms already struggling financially will be put under further stress.
The Japanese Trade Union Confederation, known as Rengo, has set a goal to raise the minimum wage to ¥1,000 in all prefectures by next year. “In order to make ends meet, every prefecture now has to raise the minimum wage to ¥1,000. I think this year’s ¥50 target is a big step toward that goal,” Akira Nidaira, a Rengo executive, said during a briefing with reporters on Wednesday. Nidaira is a member of the minimum wage panel. Representatives from management and labour policy experts are also on the panel.
Currently, Tokyo’s minimum wage of ¥1,113 an hour is the highest in the country. Seven other prefectures have minimum wages above ¥1,000 an hour. There are 12 prefectures that have not reached the ¥900 mark, including Iwate at ¥893 an hour. A ¥50 increase this year will add eight other prefectures to the ¥1,000 group, while all will top ¥900. By international standards, Japan’s hourly minimum wage will remain low even after the increase. In Tokyo, it will be the equivalent of about $7.60, slightly higher than the $7.25 national standard in the United States but far below New York City’s $16.00. Australia’s minimum wage is 24.10 Australian dollars ($15.70).
Commenting on the increase, Ken Kobayashi, the head of the Japan Chamber of Commerce and Industry, a lobby body for smaller enterprises, said that the panel’s recommendation is backed by a solid pay raise from this year’s spring labor-management negotiations as well as recent price increases. However, “price pass-through, including labour costs, has yet to make sufficient progress among many small and midsize businesses,” he said, requesting stronger support from the government for such firms to enable them to raise prices.
Increases in the minimum wage over the past few years have already been affecting them. According to a survey by the Tokyo Chamber of Commerce and Industry released in February, 65.7% of companies surveyed said that the current minimum wage is hitting them financially. For the government, it is keen to keep the average minimum wage growing rapidly as it is targeting ¥1,500 an hour by the mid-2030s. “We welcome the strong guideline for the minimum wage hike,” Chief Cabinet Secretary Yoshimasa Hayashi said. He added that the government will do its utmost to support small enterprises in passing along rising costs as well as to improve labor productivity through investment in automation and other cost-saving measures.
The Japan Times
