Government Frankly Urging a Wage-Increase!?

* Written by Yoichi TAKAHASHI, PPPC Chairman / Kaetsu University Professor

 The economic and fiscal policy minister Akira Amari said “we want to

make an environment in which companies would be embarrassed if they

didn’t raise the wages even though their profits are rising.” To me,

it raised a question whether the central government should pressure

private companies to raise wages in such a straightforward manner.

 Let’s look at Amari’s statement from two perspectives; political

and economic. First, from a political point of view, Amari’s remark

scores almost perfect. All Amari said was what the labor unions should

have voiced strongly. Needless to say, a controller of the labor

unions is Rengo, the main supporter group of the opposition Democratic

Party of Japan. Since Amari only said what DPJ should have said on

behalf of Rengo from the ruling side, it was like beating DPJ at its

own game as a political strategy.

 From the beginning, although the monetary policy is recognized as an

employment policy in the western countries as it lessens unemployment

rates, the former DPJ government never attempted to consider its

utilization to increase employments. So it was obviously a political

defeat of DPJ when Prime Minister Shinzo Abe started mentioning the

relaxing monetary policy as soon as Liberal Democratic Party came back

to power. Perhaps, Rengo should have supported Abe Cabinet from the

beginning as it cares about the employment instead of DPJ which didn’

t do anything. Amari’s comment, touching a sore spot of DPJ and Rengo,

was a fitting one from a political viewpoint.

 However, Amari’s remark is a failure looking from an economic

perspective. The monetary policy is helpful in terms of employment,

indeed, but its effect will usually be visible only after two years or

so. As it was this April when the Bank of Japan took the drastic

relaxing monetary policy, its policy effects will be observable from

around April two years later. Meanwhile, the Cabinet schedules to

raise the consumption tax rate from next April, and its negative

impacts on the national economy will be evident immediately. While the

Cabinet seeks to mitigate possible negative impacts of the tax-hike by

a 5 trillion yen of economic stimulus package, the amount of

government revenue expectedly increasing from the next fiscal year by

the tax-hike is some 8 trillion yen; further, the economic stimulus is

a temporary one for the fiscal year while the tax-hike will last ever.

Therefore, the private companies cannot help being cautious on raising

salaries of the employees because they cannot be opportunistic about

the socioeconomic prospects.

 To summarize, while effects of Abe’s ‘first arrow’ monetary policy

is yet to be seen, Abe’s ‘second arrow’ fiscal policy entailed just

5 trillion yen, amounting to only a half of the 10 trillion yen of

supplementary budget compiled this January and 5 trillion minus of the

last year’s economic package. Plus, the government officially

announced to impose more 8 trillion yen by the tax-hike.

 Many companies would probably like to request the government to

suspend the tax-hike which will likely bring unrests to the future of

society if the government demands them to raise salaries in an

exchange.

 A few words for the minister Amari: please stop having an ‘easygoing’

idea that the situation could be handled by a little bit of corporate

tax cuts despite that you are raising the sales tax. It is more

embarrassing to raise the tax before the country eradicates deflation

and the companies find it easy to raise salaries of the employees 

given visible positive effects of the “Abenomics.”