An advisory panel at the labour ministry decided late Monday to seek a rise in the national average of minimum hourly pay by ¥31, or 3.3%, from the current ¥930 (US$7.07) this fiscal year, according to the ministry.
If finalised, that will be a record hike both in terms of the amount and percentage difference since the government began using hourly pay as the benchmark in 2002.
Prime minister Fumio Kishida sees wage gains as a key factor to drive growth while he also seeks a fairer distribution of wealth. Except for fiscal 2020 at the height of the pandemic, the minimum wage has risen at least 2% since fiscal 2013 as late prime minister Shinzo Abe pressed ahead with his economic revitalisation programme.
“Raising the minimum wage is important in terms of investing in people,” Deputy chief cabinet secretary Seiji Kihara told reporters Monday, before the panel’s decision was made. “I hope it’ll be increased at a pace that’s appropriate for the era of new capitalism.”
A steady wage increase of 3% is seen as necessary to keep inflation above the Bank of Japan’s 2% target in a sustainable manner. BOJ governor Haruhiko Kuroda has repeatedly cited stagnant paychecks as a missing element that keeps inflation from becoming sustainable beyond a temporary boom in commodity prices.
In addition to the minimum wage, other measures show workers are getting a modest boost in their paychecks, but overall, the wage hike pace remains below 3%.
About 4,900 unions in Japan secured a 2.07% increase in average monthly pay in this year’s wage negotiations, according to Rengo, the largest umbrella organisation of labour unions. That compares with a 2.2% gain in 2015, the most achieved during Abe’s tenure.
But most workers are not represented by unions in Japan as the unionization rate stood at 16.9% in 2021, according to the labour ministry.
For all workers, overall cash earnings added just 1% in May from a year ago while real wages, adjusted for inflation, fell 1.8%. That means inflation is eroding people’s spending power, which may hurt consumption.
Increases in the minimum wage help households, but it also means higher costs for firms, said Tsuyoshi Ueno, a senior economist at NLI Research Institute in Tokyo.
Unless companies improve their productivity it could lead to cutbacks in part-time workers’ hours, and doesn’t necessarily lead to positive economic growth, he said.