Use big-boned policy to create an environment to raise minimum wages

The Yomiuri ShimbunA steady raising of wages from the bottom up is inevitable for economic revitalization. Efforts have to be exerted to develop an environment in which minimum wages will go up without confusion.

The government has compiled a draft of a new version of the Basic Policy on Economic and Fiscal Management and Reform, known as the “big-boned policy.” One of the pillars is raising minimum wages. The draft explicitly says “it is aimed at raising the national average to ¥1,000 at a very early date.”

In 2015, Prime Minister Shinzo Abe announced a policy to raise minimum wages by about 3 percent annually. Minimum wages have increased by about 3 percent per year for the past three straight years, and currently the average minimum wage is ¥874. If the average continues to increase at this pace, it will reach ¥1,000 in around fiscal 2023.

Yet minimum wages are still lower compared to those in major advanced countries such as France and Britain. It is understandable that the draft aims to realize the goal at an early date.

Increases in minimum wages will grow the incomes of general workers including part-time workers, and are thus expected to have the effect of stimulating consumption. It is also important in terms of reducing anxiety for the future and aiming for an economy driven by domestic demand.

One task that has to be addressed is consideration for small and medium-sized companies. The Japan Chamber of Commerce and Industry opposes any quick pace of increasing minimum wages. It is estimated that should the average minimum wage reach ¥1,000, the cost of labor for an employee hired at such a wage would increase by nearly ¥300,000 a year, including the employer’s share of social security premiums.

Support smaller businesses

In 2018, South Korea raised minimum wages by a hefty 16 percent in a bid to increase incomes and correct disparities. As a result, employment in service industries such as the retail, restaurant and hotel industries deteriorated, and the increase has reportedly had negative impacts on the economy instead.

The level and speed of raising minimum wages have to be determined carefully by closely examining the blows to small and medium-sized companies as well as benefits to the whole economy.

At the same time, support for small and medium-sized companies must not be forgotten. Rather than pork-barrel measures, steps that will lead to an increase in technological capabilities and an improvement in productivity with the use of information technologies are indispensable.

Companies that have some leeway are urged to stop depending on cheap labor. Such companies must strengthen their financial base through labor-saving measures and revenue increases.

Many small and medium-sized companies are in trouble due to a lack of successors. The draft included enhanced support for cases in which a business is handed over to a third-party who is not a relative. It is a reasonable measure.

The draft also placed emphasis on reforms that aim toward social security for all generations, including securing employment opportunities until the age of 70.

However, with regard to the key issue of reviewing costs and benefits, the draft did not include enough specific measures, only stating, “Comprehensive studies will be carried out.” The path to fiscal reconstruction is also unclear.

It is important to steadily tackle the reforms that accompany increases in people’s burdens while smoothly managing the raise in the consumption tax rate in October.

(From The Yomiuri Shimbun, June 12, 2019)Speech


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