Japan sets up minimum wage raise

Japan's workers are hoping for a bigger slice of economic growth

Japan has paved the way for an increase to its minimum wage, the first major change in more than 40 years.

The cabinet has approved an updated wage bill that is aimed at narrowing the gap between rich and poor in the world's second-largest economy.

Unions have called for higher wages as Japan emerges from a decade of problems and corporate profits start to pick up.

However, the bill needs Parliamentary approval, and some observers argue that it does not go far enough.

"The government is effectively postponing the issue," said Takahide Kiuchi of Nomura Securities.

Round tables

One criticism is that the updated bill does not give the level that the wage should be raised to from the current national average of 673 yen (£3) an hour.

Instead it continues to leave the job of setting minimum wage levels to committees in each of Japan's prefectures, meaning levels look set to continue to vary widely across the country.

"The government says it aims to boost the minimum wage on a scale that has not been seen in the last 40 years, but its plan only stipulates that the minimum wage will be decided at round-table committees," Nomura's Mr Kiuchi said.

One of the main concerns for politicians and observers over recent years has been the growing disparity between the haves and have-nots of Japan, in country that has always prided itself on the homogeneous nature of its society.

Recent media reports in Japan have suggest that a number of large companies were planning to raise the wages they pay their staff in order to pass on the benefits of Japan's improved economic performance.

Work drive

The government is keen for this to happen as it wants the country's economic recovery to be underpinned by consumer spending and growing voter confidence in the outlook for both themselves and the nation.

Higher wages would also help small companies attract better quality workers, boosting their productivity and output. However, it would also make it more expensive to pay their workforce.

Another problem is that at present it is possible to make more money from benefits than from a minimum wage job.

According to figures published by the Reuters news agency, a worker can earn about 125,500 yen working an eight hour day for 22 days a month. Monthly welfare benefits are closer to 137,000 yen, the news agency reported.

Should Parliament approve the bill, it would take effect in the middle of 2008 and would increase the size of fine that could be slapped on employers that pay less than legally required.