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Editorial: Spread wage hikes among workers in smaller firms, nonregular employees

  • November 17, 2016
  • , The Japan News , 7:59 pm
  • English Press

Passing high corporate earnings on to employees will lead to stimulating consumption and invigorating the economy. To effectively pull the nation out of deflation via a virtuous circle, it is crucial to accelerate efforts to realize wage hikes.

 

At a meeting of the government’s panel for work-style reforms, Prime Minister Shinzo Abe called on the nation’s business circles to implement continued wage hikes during the annual wage negotiations next spring.

 

Abe said: “A wage hike next year holds the key to maintaining a virtuous economic circle. I hope the wage hike will be at least at about the same level as this year’s.” Sadayuki Sakakibara, chairman of the Japan Business Federation (Keidanren), said, “[We’ll] keep up the wage hike momentum.”

 

This is the fourth year the government has called on businesses to raise wages. The wage-hike rate, which had earlier been at the 1-percent level, rose to the 2-percent range in 2014 and onward.

 

Wages are primarily decided by companies themselves, based on their labor-management agreements. But companies, which were deeply ingrained with a defensive management mentality during the protracted deflationary phase of the economy, remain wary of wage hikes, even when their earnings increase.

 

It may be understandable that Abe continually calls on businesses to make efforts to raise wages.

 

It is worrisome that dark signs have emerged in corporate performances — which had been good until recently — with some corporate managers expressing unwillingness to implement wage hikes, arguing that room for pay increases is limited.

 

Manpower investment needed

 

Although not a few companies posted a decrease in income and profit in the midterm settlement of accounts for fiscal 2016 due to the yen’s rise in value, their profit levels remain high. In the most recent period, the yen’s weakening has advanced markedly, while stock prices have been recovering. Companies’ internal reserves stand at about ¥380 trillion, a record high.

 

Corporate managers should make moves toward growth, without being shackled with excessive concern about the future.

 

Manpower investment is particularly important. Enhancing productivity through the expansion of training programs designed to raise employees’ skills, thus augmenting their earnings, will secure funds for further wage hikes.

 

The base for wage hikes among small and medium-sized companies should also be broadened. The government is studying the possibility of expanding corporate tax cuts for small and medium-sized enterprises that are making efforts to raise wages. It is also vital to take such measures as helping smaller enterprises boost productivity, without relying too much on the tax system.

 

The fact that wages have not risen much, despite a marked decline in the jobless rate, stems partly from an increase in the number of nonregular workers.

 

The government, labor and management have to cooperate with each other and make efforts to improve employment conditions of nonregular workers, including their promotion to the status of regular workers. Realizing equal pay for equal jobs will also be a challenge.

 

Some believe that an expected increase in out-of-pocket medical expenses and a hike in the contribution to the nursing-care insurance program will reinforce consumers’ budget-mindedness. To boost consumption, it is also essential to enhance the sustainability of the social security system, while making efforts to dispel future concerns among the people.

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