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No.263 (2018/8/28)
Council Proposes National Average Minimum Wage Hike of 3% for Third Straight Year

On July 25 the tripartite Central Minimum Wage Council, which consists of six members each representing the public interest, labour, and management, announced that its proposed minimum wage hike guideline for fiscal 2018 was a national average of 26 yen/hour (the equivalent of a 3% raise to 874 yen), which if implemented would be the highest increase for the third straight year. Indeed, the rise would be higher than the average 2.07% hike achieved by trade unions affiliated with RENGO (Japanese Trade Union Confederation) in this year’s spring wage negotiations. If the minimum wage were increased by 3% every year, it would be possible to reach 1,000 yen (about $9) by 2023.

From now on Minimum Wage Councils in each prefecture will decide new regional minimum wages to be applied from October. In fiscal 2017 the national average at the time of the central council's subcommittee decision was 848 yen, up 25 yen from the previous year (an increase rate of 3.0%); in fiscal 2016 the national average was 822 yen, up 24 yen from the previous year (also an increase rate of 3.0%). The increase in the minimum wages will affect nonregular workers, such as part-timers and temporary dispatch workers. Since such people now account for 40% of the nation’s employed workforce, it is expected that personal consumption, which accounts for 60% of gross domestic product, will become less stagnant. In its Action Plan for the Realization of Workstyle Reform, the government stipulates that it will aim for a national average minimum wage of 1,000 yen so as to ensure a positive economic cycle.

One problem, however, is the widening regional gap. Currently the highest minimum hourly wage is Tokyo’s 985 yen, which is 225 yen higher than the 760 yen in the lowest-ranked prefectures of Nagasaki, Kochi, Miyazaki, Oita, Kumamoto, and Okinawa. Another problem is how to support small and medium-sized enterprises, which are the primary employers of people working on minimum pay levels. They are going to face increased labour costs at a time of serious labour shortages in Japan.

Among the members of the Organization for Economic Cooperation and Development (OECD), Japan's minimum wage remains at a low level. Many advanced countries are targeting a minimum wage of $15. Sources say that San Francisco is set to become the first major US city to increase its minimum wage to $15 an hour.

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