Photo/Illutration A payslip (Asahi Shimbun file photo)

Most small companies are not pleased with raising the minimum wage at an accelerated rate, according to a nationwide survey conducted by the Japan Chamber of Commerce and Industry (JCCI). 

The survey released March 5 polled businesses on how implementing Prime Minister Shigeru Ishiba's goal would affect them.

The Ishiba administration hopes to raise the average of the minimum wage nationwide to 1,500 yen ($10) before the end of the 2020s.

Twenty-five percent of small companies located in rural areas answered that meeting this target is "impossible." 

If the minimum wage were raised to meet the government's goal, 20 percent of small companies in rural areas said they would consider suspending or closing down their businesses.

The survey was conducted from January to February, and 3,958 businesses registered with JCCI from across the country responded.

Answers were categorized into two groups based on location—rural areas and urban centers, with the latter covering Tokyo's 23 wards and ordinance-designated cities in other prefectures. 

This is the first time the JCCI has conducted a survey on the reception of the government's minimum wage target.

The current average minimum wage is 1,055 yen nationwide.

To realize the Ishiba administration’s goal, an average annual increase of 7.3 percent is necessary. This is more than double the yearly rate of increase of 3.1 percent over the past 10 years.

In the survey, 19.7 percent of all respondents answered that it is impossible to meet the government’s new target and 74.2 percent of all those polled indicated it would be "difficult" or "impossible." 

Of small rural companies whose employees number 20 or fewer, 25.1 percent think the goal is unachievable, a rate 9.5 percent higher than their counterparts based in cities. 

Notably, when companies in this sub-demographic that answered "difficult" are combined with ones who said it is "impossible," the total rate jumps to 76.4 percent. This is 14.5 percent more than companies in urban areas.

When asked how they would be affected if the minimum wage were raised by 7.3 percent annually from fiscal 2025, the discrepancy continues. 

Looking broadly, 15.9 percent of all respondents said it would be "difficult to continue business operations due to declining profits and they would consider shutting down or suspending operations." 

However, this rate among small businesses in rural locales was 20.1 percent, 6.5 percent greater than urban companies.

THE RIGHT RATE

JCCI had expressed concern prior to this survey that raising the minimum wage beyond the ability of businesses to pay employees could backfire immensely.

It believed that not only would it cause small companies to go out of business, but hiking the minimum wage could destroy the industrial and commercial infrastructure supporting life in rural areas.

The survey results confirmed the organization’s concern.

In the free-response section of the survey, one retailer wrote, “If we cannot reflect the increased costs on product prices, we may consider going out of business.”

Regarding a realistic rate of increase that companies surveyed could manage, 67.9 percent think a maximum of 3 percent per year on average is achievable.

Only 1 percent said around 7 percent or a minimum of 8 percent were feasible.

The survey also asked about the impact of last year's revision, which raised the national weighted average by 51 yen, the largest increase ever. 

Of all respondents, 44.3 percent said they increased wages because they had employees earning less than the minimum wage. This was 5.9 percentage points higher than the previous year's survey, and the highest since comparable data became available in 2015.

Seventy-six percent of companies answered that the current minimum wage level is “a great burden” or “somewhat of a burden.” This was an increase of 10.3 percentage points and also the highest since comparable data became available in 2021.

“Our labor costs have risen to the point where we have to consider cutting staff, even though we are suffering labor shortages,” a company from the accommodation and food service industry wrote in the survey.

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