Japan PM Encourages Companies To Increase Wages: Updated Dec. 16

 https://mainichi.jp/english/articles/20211126/p2g/00m/0bu/058000c

Article:

TOKYO (Kyodo) -- Prime Minister Fumio Kishida said Friday he hopes businesses that have recovered to pre-pandemic levels will raise employee wages by more than 3 percent next spring as he tries to realize a virtuous cycle of economic growth and redistribution of wealth.

Kishida made the remarks during a meeting on putting his vision of a "new capitalism" into motion and was joined by the leaders of three major business lobbies as well as Rengo, Japan's largest labor organization, formally called the Japanese Trade Union Confederation.

Ideas:

Suggesting or asking companies to increase wages as a way to redistribute the wealth is a novel or good idea. But if companies have not done it recently or for a while its going to take more than a suggestion for them to increase wages.

Another article already posted for later gives some ideas that the Japanese government is going to try to get companies to increase wages.

South Korea has been trying for a few years to redistribute wealth but using a different strategy. And it hasn't gone very well. Over the past few years SK has increased the minimum wage, a law, as a way to help low wage earners feel like they have what is called a living wage or feel good enough about the wages they might spend some in the economy.

But there have been challenges related to it. Many of the businesses who mainly use the minimum wage for their employees are either small businesses, franchise operators, service type businesses, and some small manufacturing businesses. 

What is common with all of these businesses is that they all operate on very slim profits margins and some or most can't afford the extra costs related to the minimum wage that has gone up every year the past few years.

The government has tried giving subsidies to companies to help them with the higher minimum wage but some companies say it isn't enough. What has happened is some companies are decreasing the hours of part-time or low wage workers as a way to maintain their profit margins. Some have even fired their part-time workers, such as the husband and wife operated convenience stores because they can't afford the extra costs.

Most if not all of the large companies in South Korea of course are not affected as they most likely already pay wages more than the minimum wage.

Article:

"I am hoping for pay hikes that eclipse 3 percent, which will be appropriate for the launch of the new capitalism," Kishida said. "I will stand in the forefront to help small- and medium-sized businesses so that they can properly shift raw material, energy and labor costs" onto consumers.

Masakazu Tokura, chairman of the Japan Business Federation, the country's largest business lobby known as Keidanren, responded he will call on member businesses to implement pay hikes.

Labor unions typically hold wage negotiations with management every spring.

Ideas:

The 3 percent goal might sound good, but with households feeing the pressure from high energy cost and the increase in prices already at supermarkets and restaurants, is it going to be enough? And just how much are companies actually willing to increase wages.

Unfortunately, in the 21st century, stockholders are always concerned with each quarter's results and profit margins are almost everything for some companies.

Consumers have got to feel good about their salaries. If they don't have enough extra or disposable income after monthly bills are paid and after they go to the supermarket for their weekly food needs, how can they afford to go out and about to other places.

And then the idea of passing on the costs to the consumers. It's only natural that companies want and need to keep a certain profit margin but Japanese consumers have become very price conscious or price elastic meaning see and feel any increase in prices.

As such many companies have been very reluctant to pass on their supply costs to customers, which results in decreased profits margins where the slim profits margins crowds other kinds of spending such as increasing salaries or increasing investments in needed areas.

Ideas:

Last week, Kishida's government approved its economic stimulus package, including a plan to raise the monthly salaries of care workers, nursery school staff and nurses by 1 to 3 percent from current levels.

The care workers' pay is regulated and widely seen as insufficient compared with other industries.

Upon becoming prime minister in October, Kishida pledged to reduce wealth disparity by boosting middle-class incomes.

Ideas:

It always good when workers can feel better about their salaries. Again whether the 1 to 3 percent is enough remains to be seen.

And yes, the government can't do everything for everyone in society but should try ensure that everyone at least has a living wage or wage that is high enough so that workers don't have to worry from month to month about how they are going to survive.

Boosting or increase middle-class income is important in every country and every society as over the past 20 to 30 years the income gap between the rich and the middle class has gotten wider and wider.

More on this later in the next article about the same topic, but it is questionable if Kishida and his government can pull it off. It is not going to happen tomorrow or next week. It might take a long time for consumers/workers feel a difference.

Have a nice day and be safe!