Policies needed that can achieve high target for wage increases

The Yomiuri ShimbunPay raises that contribute to a virtuous cycle of production and consumption are important to sustain economic growth. Unless the government implements a carefully planned improvement of the business environment, companies will not be able to proceed with wage increases, even though there is an understanding that raises are necessary.

Prime Minister Shinzo Abe said, “I expect a 3 percent pay raise to be realized,” in reference to next year’s shunto spring labor-management negotiations.

Kansei shunto, in which the government directly encourages the management to raise wages, is in its fifth consecutive year. However, the prime minister had not mentioned specific pay raise figures before.

The average pay raise rate, including pay-scale increases and regular salary increases, fell below 2 percent for the first time in four years, averaging 1.98 percent at this year’s spring labor-management negotiations. Modest wage increases continue under the Abenomics economic policy package, but the momentum is clearly lacking compared with corporate performances, which have been at their highest levels.

The last time, when pay raises averaged above 3 percent, was in the early 1990s, when the impact of the bubble economy still remained. This high hurdle will need more than the government’s slogan to be achieved.

If the government earnestly wants to achieve such a high goal, a comprehensive policy package based on analysis of the current situation of sluggish wage increases is required.

Labor shortages are seriously affecting industries as the economy is recovering. An increase in nonregular employees such as part-time workers has made up for those shortages. Promoting the employment of workers on regular contracts will certainly have the positive effect of stimulating consumption from two aspects — increased wages and stable working conditions.

Use internal funds effectively

The government is considering extending tax incentives, such as corporate tax cuts, for companies that raise wages by 3 percent or more.

The business environment varies greatly depending on the company and industry. A system should be carefully mapped out not to foster a sense of inequality. Primarily, many small and medium-sized companies do not pay corporate tax as they end the financial year in the red. It is difficult to expect much from such tax incentives.

The government needs to develop a business environment in which companies can engage in business aggressively.

The government will vigorously promote investment in such fields as artificial intelligence in its “productivity revolution” initiative.

It is necessary to steadily carry out regulatory reforms to create new markets as well as growth strategies to encourage promising industries.

It is also vital to establish a sustainable social security system to eliminate future anxieties of consumers and others.

Cash and savings held by companies have reached ¥210 trillion, an increase of 25 percent since the start of Abenomics. The Financial Services Agency will compile guidelines for corporate managers around next spring to urge companies to effectively utilize internal funds.

The government will encourage corporate managers to hold talks with institutional investors and shareholders, and expects its guidelines to be utilized to plan for the use of funds. The new guidelines should become an opportunity for companies to engage in business aggressively.

(From The Yomiuri Shimbun, Nov. 6, 2017)Speech


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