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Gov't backs 3% minimum wage hike with 'Abenomics' on the line; small firms resist

The government has proposed the largest ever minimum wage hike, suggesting an average national increase of 24 yen per hour in fiscal 2016 -- about a 3 percent increase.

Company managers, including small- and medium-sized businesses that struggle financially have resisted the move, but Prime Minister Shinzo Abe is taking the lead in forcing through the measure. Still, the path to the administration's target of achieving a minimum wage of 1,000 yen per hour by 2020 is a tricky one, and it remains unclear whether the measure will lead to real improvement in the quality of life of those not in regular employment.

Prime Minister Abe mentioned the minimum wage on July 13, during the first meeting on the government's Council on Economic and Fiscal Policy since the July 10 House of Councillors election, stating, "This is the first fiscal year for us to aim for a national average of 1,000 yen. I want to ask the minister of health, labor and welfare and the minister of economy, trade and industry for their utmost efforts as we eye a 3 percent increase this fiscal year." It was an unusual request from the prime minister at a point when the labor ministry's advisory panel had already started discussing the minimum wage.

Forming the background to Abe's request was his administration's agenda of wanting to spur spending through the measure, restore the economy and give the prime minister's Abenomics economic policy mix another boost.

Consumer spending, which accounts for 60 percent of the nation's gross domestic product (GDP), has slumped. The Abe administration hopes to break away from deflation and expand GDP through strong promotion of Abenomics, but at hand, the economy is shaking. The real economic growth rate this fiscal year fell from the original prediction of 1.7 percent to 0.9 percent.

The goal of increasing the minimum wage to 1,000 yen per hour through yearly hikes of 3 percent was outlined in the government's "Plan for Dynamic Engagement of All Citizens" that was approved by the Cabinet in June, and so the government was under pressure to go through with a 3 percent hike. One ruling party official commented, "The 3 percent hike was due to nothing other than the fact that Abenomics is standing on the brink of a cliff."

At the same time, if the minimum wage is lifted, it will put pressure on the finances of companies, which will face bulging personnel expenses. There has been a particularly strong backlash from small- and medium-sized companies. At a meeting on the minimum wage on July 26, there was persistent resistance from company management officials. One of them commented that if the government presented unexplainable guidelines for raising the minimum wage with no concrete basis and no grounding in various statistics, then it could result in major confusion in regional deliberations.

When Abe made his request to raise the minimum wage at the July 13 meeting of the Council on Economic and Fiscal Policy, he called for there to be "no omission of support for small- and medium-sized companies." The government has accordingly been quickly preparing to enrich financial support for small and tiny companies, such as by subsidizing some of the expenses of businesses that go ahead with wage hikes. The government has thus been strongly backing the preparation of an environment enabling the largest minimum wage hike to go ahead.

During a talk in Fukuoka on July 27, Abe again touched on the minimum wage, stating, "In terms of the hourly wage, we compiled guidelines today on a target of raising the minimum wage by up to 24 yen. By putting the fruits of Abenomics to use and powerfully revolving a positive economic cycle, we will increase the speed of growth with our eyes on a GDP target of 600 trillion yen."

In a news conference on the government's decision, Takashi Suda, an official in the Department of Working Conditions in the Japanese Trade Union Confederation (Rengo), welcomed an increase in the minimum wage, saying it would help raise the overall wage level. But he warned that it "goes against the grain" to raise the minimum wage as a way to lift nominal GDP to 600 trillion yen.

In the meantime, some say a target of 1,000 yen per hour is not enough. Niki Harada, 27, a member of the group AEQUITAS, which is calling for a minimum wage of 1,500 yen per hour, welcomed the increase but said, "Even if the minimum wage were raised 3 percent a year as the Abe administration says, it would take seven years to reach 1,000 yen. That's too late." He pointed out that a wage of 1,000 yen an hour works out to about 2 million yen a year and said, "That wouldn't allow an escape for the working poor. Working full time on a minimum wage of 1,500 yen with two days off per week would finally bring the wage close to 3 million yen a year. That's about how much one needs to live."

Compared with other members of the Organisation for Economic Co-operation and Development, Japan's minimum wage is low. The reason it has remained low is that emphasis has tended to be placed on firms' ability to provide wages. Rengo President Rikio Kozu commented, "To achieve a minimum wage of 1,000 yen, there is a need to revise the way of deciding it, such as by basing it on living expenses."

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