A benchmark for an increase to Japan's average minimum wage for the 2017 fiscal year has been set at 25 yen per hour, with a year-on-year increase of more than 3 percent for the second time in a row.
If it is revised according to the benchmark, the average minimum wage will be 848 yen per hour. The 25-yen hike is the highest increase since fiscal 2002 when the state started calculating the country's minimum wage on an hourly basis instead of minimum daily pay.
The government of Prime Minister Shinzo Abe has included a minimum wage increase of about 3 percent every year in its "Plan for the Dynamic Engagement of All Citizens." The latest decision means a step forward to increasing the national average minimum wage to 1,000 yen per hour, which is set as a midterm target.
However, Japan's minimum wage is low to begin with compared to other developed countries. It is about 60-70 percent of the minimum hourly pay in France and Australia. Even if the amount is increased according to the latest benchmark, a person will only make around 1.6 million yen a year with a full-time job that pays the average minimum wage.
The government is working on measures to hold down overtime hours with its working-style reform plans, but there must be many workers who will not see a rise in their take-home pay despite the slight increase in the minimum wage due to overall work hours being cut.
Raising the country's minimum wage is necessary, but it will not directly lead to a wage hike for so-called non-regular workers who are paid slightly higher than the minimum wage. To improve the situation of the working poor, who have jobs but struggle to make ends meet, the effect of the latest minimum wage hike needs to spread to workers as a whole.
Concerns remain strong over the minimum wage hike hurting small- and mid-sized businesses as there are many part-time workers at such firms who are usually paid around the minimum wage.
While small- and mid-sized businesses should work on improving their productivity, it is necessary to require large companies to comply with appropriate transactions with smaller businesses. It is not uncommon for big firms to abuse their superiority and force subcontractors to accept trade conditions disadvantageous to smaller businesses, such as cutting the price of product delivery unfairly. To create a positive growth cycle in the economy as a whole, small- and mid-sized businesses should be protected.
The minimum wage hike benchmark is decided based on the division of 47 prefectures into four ranks from A to D depending on their local economic situations and other factors. Miyazaki and Okinawa prefectures, which are grouped in the D rank, will see a 22-yen raise per hour, increasing the minimum hourly wage in these prefectures to 736 yen. However, when compared to the minimum wage in Tokyo set a 958 yen -- the highest among all prefectures -- the amount in Miyazaki and Okinawa is 222 yen lower.
It is not uncommon to see a minimum wage gap of over 100 yen even between neighboring prefectures. Therefore, measures to narrow regional gaps in minimum hourly wages should also be addressed.
One of the central pillars of the government's working-style reforms is improving the treatment of non-regular workers, and the minimum wage hike is the cornerstone to achieve this goal. The government needs to step up efforts to improve labor conditions for such workers, including implementing an equal pay for equal work system.