Japan Press Weekly

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2014 July 30 - August 12 [ECONOMY]

Higher consumption tax sweeps away wage gains

Akahata editorial (excerpts)

Since April, labor statistics have shown a drastic decrease in workers’ real wages. The term of real wages refers to wages that have been adjusted for inflation.

The labor ministry monthly survey on workers’ working conditions, known as the monthly labor survey, confirmed that workers’ cash earnings showed an upward trend in June. However, real wages dropped by 3.8% on a year-on-year basis. The internal affairs ministry survey on the household economy also showed similar results. According to the survey, net earnings of worker households (composed of at least two members) decreased by 6.6% in real terms from a year earlier.

The reason for the fall in real wages in the labor ministry survey since April is because the consumption tax increase from 5% to 8% in April triggered a sharp increase in consumer prices. The consumer price index remained at a high level on a year-on-year basis: 3.4% in April, 3.7% in May, and 3.6% in June.

Meanwhile, the labor ministry released other data regarding pay raises as a result of the annual labor-management wage negotiations. According to the data, although private sector workers won an average 2.19% pay increase, up 0.39 percentage points from the previous year, it is insufficient to cover the consumption tax hike of three percentage points.

Declining real wages will lead to a further deterioration in workers’ living conditions. The need now is for the government to take measures to secure higher wages for workers and tackle the price rise, not to implement a further consumption tax increase.