Japan Press Weekly

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2012 May 30 - June 5 TOP3 [WELFARE]

Minimum wage hike would decrease livelihood protection spending

An increase in the minimum hourly wage to 1,000 yen will raise the incomes of 164,000 households currently enrolled in the livelihood protection program and save 380 billion yen in national spending for the program, according to an estimate by the Japan Research Institute of Labor Movement (Rodo-soken).

Rodo-soken, the think tank of the National Confederation of Trade Unions (Zenroren), based its estimate on the Labor Ministry’s 2009 Basic Survey of Wage Structure.

Since the late 1990s, the number of families receiving livelihood protection benefits has sharply increased and the government has spent about 3 trillion yen for benefit payments. Given that 12.9% of livelihood protection recipient families receive some amount of wages, an increase in the minimum hourly wage to 1,000 yen will allow these families to no longer depend on welfare assistance. As a result, the government would be able to reduce its spending for the assistance program by 380 billion yen.

Regarding economic ripple effects, the Rodo-soken analysis argues that a 1,000 yen hike in the minimum hourly wage would help raise all workers’ wages by 6.37 trillion yen per year and their household consumption expenditure by 4.56 trillion yen, and push up Japan’s GDP by 0.8%.

At present, the national average minimum wage is 737 yen per hour. The amount of money needed to fund the 1,000 yen hike is 6.58 trillion yen which is equivalent to the use of 2.55% in corporate internal reserves amassed as of the end of 2009 by large corporations with capital of 1 billion yen and more.

In order to encourage small- and medium-sized companies to support the minimum wage hike, Rodo-soken report argues that the government should instruct large companies to stop cutting unit prices paid to their subcontractors and carry out measures to provide financial support to small- and medium-sized businesses.