Japanese Premier Fumio Kishida on Friday urged firms whose profits have returned back to pre-pandemic levels to boost wages at least 3 per cent during their labor talks in the spring of next year, with the aim to build a sustainable cycle of economic growth and equitable distribution of wealth.
Kishida was also announcing at the “new capitalism” panel meeting that the government will take measures to increase the salaries of welfare workers, such as nurses, childcare workers and caretakers by 3 percent per year.
The recovery of the third largest economy in the world unbalanced across industries, Kishida vowed to help small businesses pass on the cost of energy, raw materials and labour expenses to their customers.
The proposed wage hike is part of Kishida’s plans to reduce wealth inequalities and redistribute wealth. it is working to ease the burden on consumers due to rising food prices and oil costs.
“I expect that, at next year’s labour talks, those companies whose profits have recovered to pre-corona levels will raise wages by 3 per cent or more to kick-start new capitalism,” Kishida said at the panel. “The government will do the utmost to prepare an environment to back wage hikes among the private sector.”
Major Japanese firms and labor unions have agreed to wage increases of 2.18 percent in the year 2019, 2.5 per cent in 2020, and 1.86 percent this year.
“I want to reverse the trend of lowering wage hikes,” Kishida said.
A government official earlier denied reports by media outlets that the premier was planning to propose that the industry raise wages by about 3percent in the next annual wage talks.
The first time that the government have a number-based target set for companies on wage hike levels over the course of four years.
A lot of companies have kept their wage increases low to ensure jobs are protected and to avoid the effects of this pandemic. It was unclear if businesses would be willing to accept a request for wage increases on a voluntary basis regardless of whether the suggestion were presented.
“With economic uncertainty heightening, companies will be quite cautious about raising wages,” said Takumi Tsunoda, a senior economist at the Shinkin Central Bank Research Institute.
“It will be pretty tough to achieve a 3 per cent wage hike as the economy isn’t recovering as strongly as the government had expected.”
The former Prime Minister Shinzo Abe did not have much luck raising wages despite his repeated pleas for companies to share the huge profits that they made through the “Abenomics” stimulus policies.
Last year, during the wage negotiations to establish wages for 2021, Japanese firms offered the most modest wage increases in the past eight years, as the pandemic had a negative impact on profits for companies.
A slow rate of wage growth is one of the reasons that held back from preventing the Bank of Japan from hitting its inflation goal of 2 because it reduces the purchasing power of households and deters companies from charging higher prices for their products.
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The budget included money to raise the government-set wage for social workers and nurses by 3 per cent.
(Adapted from ChannelNewsAsia.com)