Sanpo-yoshi Communication
Sanpo-yoshi Communication
President's Column] Minimum Wage and Productivity Improvement
The other day, the largest-ever minimum wage increase was announced. I frankly wondered, “Why now, in the midst of the COVID-19 pandemic?” (I think business owners will agree with me.) Various organizations representing small and medium-sized enterprises, such as the Japan Chamber of Commerce and Industry, immediately voiced strong opposition (last year, the increase was postponed due to the pandemic).
However, it is also a fact that Japan’s minimum wage ranks last among major developed nations and is now even lower than South Korea’s. It was Prime Minister Suga’s strong intention to raise the minimum wage in stages to international levels. While there is a possibility that a change in government could lead to a change in policy, I am prepared for the minimum wage to continue rising (as of the time of writing, the next prime minister has not yet been decided).
The reason, as always, is the shrinking workforce (the graph below is one we always review with our employees at our milestone meetings). This country is facing a rapid decline in its population and workforce on a scale unprecedented in human history. The competition for young talent began several years ago. There is no doubt that the hiring environment will continue to deteriorate at a rapid pace going forward. Even if the government does not raise the minimum wage, it is expected that companies will have no choice but to raise salary levels on their own in order to secure workers. Since the wave of women entering the workforce has already run its course, the only remaining options are the labor participation of seniors aged 65 and older and foreign workers. It is unclear how long the Technical Intern Training Program—which has faced strong criticism from overseas and which our company also utilizes—will continue.
To begin with, we would need 600,000 to 700,000 new foreign workers every year just to offset this decline. While older adults tend to remain active until their early 70s, the number of seniors who maintain both the motivation and health to work at ages 75 or 80 will inevitably decline. When that happens, the only option left is to increase productivity with a smaller workforce and handle the current workload. The government’s basic policy also appears to be focused on this increase in productivity. Otherwise, it would be impossible to maintain GDP or cover the rising costs of social security—including healthcare, pensions, and welfare. In fact, international statistics show a strong correlation between the minimum wage and productivity, which is likely why raising the minimum wage was identified as the first step toward improving productivity.
In any case, an increase in the minimum wage directly translates to higher labor costs for our company. Unless we strive to increase added value and productivity, we will simply see our profits decline and end up in the red. We are prepared to accept that, in order to survive, we have no choice but to balance raising wages with boosting productivity.
Our company has ended up with a large number of employees who, generally speaking, lack IT literacy. I’m embarrassed to say that there are even some departments where work methods haven’t changed in decades. For now, we’re starting by bombarding them with terms like “RPA” and “DX.” I’m the only one feeling a sense of urgency, realizing that we need to make change the norm.