Unprecedentedly Big Hike in Minimum Wage

The Central Minimum Wages Council, a consultative body for Minister of Health, Labor and Welfare, agreed on the guideline for minimum wage in each prefecture this year as ¥50 yen of increase per hour from the level last year. The average of minimum wage in Japan will be rise from ¥1,004 to ¥1,054 with 5% of hike. Each local council starts discussion based on the guideline presented by the central council, which offered ever-highest minimum wage hike.

 

Minimum wage is hourly wage for all workers, including part time workers, which employers have to pay at the lowest. The Minimum Wage Act of 1959 determines the purpose of the law as improving “the working conditions of low-paid workers by guaranteeing a minimum level of wages.” It expects “securing the worker’s livelihoods, the improvement of the quality of the labor force, and ensuring fair business competition as well as to the sound development of the national economy.”

 

In short, the system was created to protect the rights of workers. Economic growth would be a by-product of improved labor condition in its context.

 

Annual minimum wage is decided by each local council in every prefecture. The central council offers a guideline for the wage hike, categorizing 47 prefectures into three: from A group in urban region to C group in rural. While the central council offered increase of ¥41 for A group, ¥40 for B and ¥39 for C last year, it presented ¥50 for every group this year. In Tokyo, for example, the minimum wage increased from ¥1,072 to ¥1,113 last year. It is likely that the price will rise up to ¥1,163 from October, if Tokyo accept the guideline of the central council. It is not unusual that a local council decide the price higher than the guideline.

 

Reflecting persistent request of wage hike from the government, average of the worker’s wage increased by 5.1% in the spring wage negotiation this year. Consumer’s price currently shows 3% of increase. The central council recognized a necessity for worker’s wage to catch up the price inflation.

 

Increase of minimum wage significantly affects all the workers in Japan. When the average of hourly minimum wage increased by ¥43 in 2023, it directly affected over 20% of all the workers, whose wage was under the level of newly set minimum wage. Once the minimum wage was raised, worker’s wage as a whole is expected to rise accordingly.

 

Steep rise of minimum wage may affect management of companies, namely small or mid-size entrepreneurs which are vulnerable for increase of labor cost. It has been argued that adding cost on the price of products is indispensable for small and mid-size entrepreneurs to improve their business in the time of inflation. The unprecedentedly big hike in minimum wage may work for fundamental solution for creating positive cycle of growth and wage.

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