Japan Press Weekly

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2019 July 10 - 16 [LABOR]

Abe gov’t’s insufficient support for SMEs poses obstacle to implementing higher minimum wage

Financial support for small- and medium-sized enterprises (SMEs) is essential to realize a drastic increase in the minimum wage. The Abe government, however, is slow in proposing effective financial support for SMEs. This has been used as a reason for opposing a minimum wage hike by employers in discussions to review regional minimum wages.

In 2018, regional minimum hourly wages were increased by between 23-27 yen. However, the Abe government this year slashed its budget for a subsidy program which is intended to promote wage hikes at smaller businesses to 690 million yen, one-fifth of the 3.59 billion yen allotted in 2014, which is tantamount to 200 yen per SME.

As requirements for applying for the subsidy program, smaller business owners need to increase workers’ hourly wages by 30 yen or more and make an investment in new equipment. With these requirements, SMEs, most of which are struggling to survive, are deterred from using the program even when they intend to offer higher wages to their employees.

Asked about government measures taken for a pay raise based on higher minimum wages, 65.2% of SME owners demanded a measure to reduce their tax and social security burden. This was shown in the results of a survey of 2,775 small- and medium-sized firms conducted jointly by the Japan Chamber of Commerce and Industry and its Tokyo local in March and April. In response to the same question, 46.8% of the respondents pointed to the need to improve the subsidy program.

The National Conference of the Association of Small Business Entrepreneurs in its policy proposal which was submitted to the government in June pointed out that although small business owners are willing to hire more workers and provide better wages, many of them are hesitating to do so due to the heavy social security burden, calling for a measure to be implemented to remedy the situation.

Given that smaller firms, regardless of their financial situation, are obliged by law to pay social-security taxes, to ease their tax burden will encourage them to increase their employees’ wages. In France, for example, the government within this year will reduce SMEs’ social security payments by 2.6 trillion yen.

The Japanese Communist Party demands that the amount of the government budget be increased to 700 billion yen to motivate small businesses to offer a pay raise to their employees and that measures be taken to lower small companies’ burden of social security costs.

Past related articles:
> Discussions on minimum wage begin [July 5, 2019]
> Gov’t support for SMEs is best way to achieve minimum wage increase [March 4, 2017]