Introduction
Have you heard the word "Minimum wageHow do you feel about the wage increase? According to statistics from the Ministry of Health, Labour and Welfare, the minimum wage nationwide is expected to exceed 1,000 yen in fiscal year 2025, and reach 1,300 yen in fiscal year 2026. This will be the highest level ever recorded.
However, behind this groundbreaking change lie the real challenges faced by small and medium-sized business owners. It's not simply about wage increases. Key issues include the reasons for the staggered implementation dates across regions and how to improve productivity.
This article provides a clear explanation of the minimum wage system, highlighting the challenges faced by small and medium-sized business owners. After reading it, you should gain a deeper understanding of the hidden meaning behind the term "wage increase."
Minimum wage to reach record high in 2025! However, numerous challenges remain.
In Japan, a significant change occurred in fiscal year 2025, with the minimum wage exceeding 1,000 yen in all prefectures nationwide. The nationwide weighted average as of the beginning of September was 1,121 yen, a 66 yen increase compared to the previous year. This can be considered a historically high level.
However, several factors are intertwined behind this. With persistently high prices and wage increases in the spring labor-management negotiations affecting companies' ability to pay, the amount is determined by local minimum wage councils in each region. In Tochigi Prefecture, it will take effect in early October 2025, while in Akita Prefecture, it will take effect at the end of March 2026, resulting in a difference in timing.
Why do regional differences occur?
"The truth is that while the minimum wage is determined based on prices and wage increases from the spring wage negotiations, the decision differs depending on the actual situation in each region." In particular, Akita Prefecture, which had the lowest minimum wage last year, managed to raise it by 80 yen and move out of last place, but has postponed the effective date.
Behind this is a local sentiment that "getting out of last place is the top priority." Rapid wage increases would lead to a burden on companies, and in order to prevent a situation where the company becomes reliant on subsidies, it is necessary to take time to address the issue.
The harsh reality for small and medium-sized enterprises
While improving management capabilities is necessary, only a limited number of small and medium-sized enterprises (SMEs) can immediately respond to a sudden increase in the minimum wage. Companies will be forced to revise their practices, and the government will need time to create subsidy and assistance mechanisms.
A movement to implement "management reforms," like that of Yamanashi Prefecture Governor Kotaro Nagasaki, is spreading. They are trying to advance digital transformation (DX) in their own unique ways. In the past, the Chamber of Commerce and Industry's advisors were in charge, but there was a challenge in that many of them were senior citizens and not very proficient in digital technology. So, they started an initiative to pair up with students from the prefectural university and provide on-site guidance on management reforms for small and medium-sized enterprises.
"University students have digital knowledge but no business management skills. The instructors are the opposite. They work in pairs to advise on improvements," is the current situation.
Three specific methods and examples for increasing productivity
① By "multitasking," from front-of-house kitchen support to kitchen assistance, outsourcing is replaced with in-house production.
The case of Seifuso, a long-established inn in Fukui Prefecture (Awara City), is highly insightful. Traditionally, the time after guests checked out was a period with little work for the staff. Furthermore, it was common practice in the industry to outsource tasks such as cleaning and laundry of linens.
However, this situation changed completely after Shota Ito, the current president's son and head manager, joined the company. All employees, including front desk staff and room attendants, adopted a multitasking work style, handling a variety of tasks from laundry to cooking assistance, and internalized work that had previously been outsourced.
The realization that "it's important to break away from industry norms" actually resulted in shorter working hours for employees. The goal was to "increase the added value per employee, which would serve as a source of funds for wage increases." As a result of these reforms, the company's performance, which had been struggling until the COVID-19 pandemic in 2020, recovered rapidly, with profit margins exceeding 10% by the July 2024 fiscal year.
② Yamanashi Prefecture: Promoting DX through a unique pairing of university students and instructors.
Yamanashi Prefecture's initiatives are extremely important in this era of regional policy competition. While the prefecture has traditionally worked on management reforms for small and medium-sized enterprises (SMEs), its methods for digital transformation were insufficient. Therefore, they tried a new approach by pairing students from the prefectural university with business advisors from the Chamber of Commerce and Industry to guide SMEs in implementing DX reforms on the ground.
This approach has the advantage of providing more practical improvement advice by combining both "specialized knowledge" and "on-the-ground experience."
③ Achieve time savings by bringing outsourced tasks in-house.
The lesson we can learn from the Seifuso case is "to create time that generates added value." It is inefficient for employees to be tied up but spend time doing nothing that adds value. Outsourcing tasks such as cleaning and laundry was the industry standard, but by bringing these tasks in-house and handling them with the company's own capabilities, the amount of time employees were tied up was reduced.
Future prospects and points to note regarding minimum wage increases
A roadmap to 1,500 yen in the late 2020s
The government has set a target of raising the minimum wage to 1,500 yen in the 2020s. This is a significant acceleration from the previous target of the mid-2030s. A simple calculation shows that a substantial increase of 7.31 TP3T will be required each year from 2025 to 2029.
The importance of productivity improvement
To realize this roadmap, "measures to increase the productivity of small and medium-sized enterprises and enhance their capacity for wage increases" are essential. This point is emphasized by Toyo Okada, Senior Research Fellow at SOMPO Institute Plus.
Points to note regarding disparities in regional policies
Raising the minimum wage is also a time of policy competition among local governments. In some cases, like the Seifuso project in Fukui Prefecture, "reforms that break with conventional wisdom" are necessary. Furthermore, collaborative approaches, such as the university student-instructor program in Yamanashi Prefecture, are also effective.
Summary
What image comes to mind when you hear the phrase "minimum wage increase," which is frequently featured in the news these days? Many people probably think, "Wages will go up = good news." However, in reality, there are complex aspects to it, such as the struggles of employers and the impact on the local economy.
In fiscal year 2025, the national average is projected to exceed 1,000 yen, reaching a record high, and in 2026, it is expected to reach 1,300 yen. However, there were differences in how these targets were achieved from region to region. In some cases, like Akita Prefecture, the effective date was changed in order to prioritize "escaping last place."
With many small and medium-sized enterprises unable to cope with rapid wage increases, improving productivity is key. Strategies that increase added value and reduce employee working hours, thereby securing the resources for wage increases, are highly effective. For example, collaborative approaches such as the "university student-instructor pair" initiative in Yamanashi Prefecture, or the shift from outsourcing to in-house operations like Seifuso in Fukui Prefecture, are very effective.
While further discussion is needed regarding the prospects of a minimum wage of 2,000 yen, it is crucial to focus on "productivity improvement" at this stage. Not only managers, but each and every one of us needs to adapt to societal changes while considering how to improve work efficiency.
