Japan Press Weekly

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2020 July 29 - August 4 [POLITICS]

PM Abe hampers wage hikes citing SMEs' severe financial condition despite cutting back SME support

Restraint on wage hikes is intensifying in local councils regarding the minimum wage following the recommendation made by the Labor Ministry’s Central Council on the Minimum Wage where representatives of management had insisted on a "freeze" on an increase in minimum hourly wages.

Prime Minister Abe Shinzo, by using small businesses' severe financial conditions due to the coronavirus pandemic as a pretext, has said that the central government will "take into consideration the severe financial conditions that small- and medium-sized enterprises (SME) are now in". However, it is the Abe administration itself that has been dramatically cutting government support for SMEs.

According to Japanese Communist Party member of the Lower House Miyamoto Toru, the government budgeted 3.6 billion yen in fiscal 2014 for its "business improvement subsidies" program which supports wage increases at SMEs and actually provided 2.5 billion yen in subsidies. In FY 2015, however, the budget went down to 530 million yen and the amount of budget implementation totaled 290 million yen. Last fiscal year, the government earmarked two billion yen for the program as a supplementary budget but put only 300 million yen into use. This year, the budget amounts to 1.1 billion yen.

The total amount of the subsidies actually provided, however, has been low. Under the program, in exchange for wage increases in SMEs, the government subsidizes part of the cost of new investment in facilities and equipment such as a purchase of computers. In short, SMEs which cannot afford to spend money on capital investment cannot use the "business improvement subsidies" program.

A survey conducted by the Japan Chamber of Commerce and Industry (JCCI) last year shows that 65.2% of SMEs called for "reduced burdens of corporate tax and social insurance premiums" as a measure to help them increase their employees' wages, and that 46.8% singled out "expansion of subsidies or improvement of the program's usability".

The National Confederation of Trade Unions (Zenroren), one of the two major national trade union centers, has long called for radical enhancement of government support for SMEs. The need is for the government to focus on SMEs in its economic policy in order to create conditions so that SMEs can be willing to increase wages.

Past related article:
> Labor Ministry’s panel gives in to business circles’ pressure not to raise minimum wages [July 23, 2020]