Japan has set a new record by raising the minimum wage by 63 yen (6.0%) this year, bringing the national average to an unprecedented 1,118 yen per hour. This reflects ongoing high inflation, but the sharp increase may have side effects. The government aims for a national average of 1,500 yen in the 2020s, though the path to achieving this is unclear.
During a Ministry of Health, Labor and Welfare council meeting, representatives for workers and employers struggled to reach an agreement. The meeting extended to a seventh session, the longest in 44 years. The minimum wage is determined by considering general wage levels, cost of living, and companies’ ability to pay. The council focused on the rising cost of living, with food prices increasing by an average of 6.4% from October to June, which prolonged the discussions.
Japan’s minimum wage is relatively low compared to other developed countries. For example, it is only 46.8% of the median wage for full-time employees, compared to 62.5% in France and 61.1% in the UK. The significant wage increase aims to bridge the wage gap between regular and non-regular workers.
However, the continuous increase for the fifth consecutive year puts a strain on small and medium-sized businesses. Only 48.6% of these companies have been able to pass increased labor costs onto their prices. There are concerns about potential business struggles due to further wage increases.
Another worry is that higher wages may cause part-time workers to hit income tax thresholds sooner, potentially leading to a reduction in working hours. Prime Minister Ishiba has shifted the target for a nationwide average wage of 1,500 yen from the mid-2030s to the 2020s. This would require annual increases of over 7%, which many businesses find challenging.
Kazutaka Maeda, an economist at Meiji Yasuda Research Institute, warns that rapid wage hikes could negatively impact employment. He suggests that ongoing increases will require government policies that improve productivity, such as helping businesses adapt and streamline operations.
by MagazineKey4532