Determinants of Minimum Wages and Welfare Benefits in Japan

This paper examines the determinants of "guideline increases (meyasu-gaku)," the actual minimum wage increases set by the regional councils, and the welfare benefits levels. The guideline increases are the increases in minimum wages recommended by the central council. Our analysis found that they are positively affected by the active job openings-to-applicants ratio, but are not affected by the wage growth rate, which is the data that is served as references for deciding guideline increases. We found that the actual minimum wage increases are set close to the guideline increases. The actual increase is affected by the unemployment rate, but is not affected by the living cost, the wage growth rate, and the wage-paying capacity. Our analysis show that the welfare benefit levels are affected by the regional difference index of consumer prices, but are not affected by the living costs and the levels of the bottom quintile of yearly income.