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Japan's Abe sets sights on improving wages, aims to redistribute wealth

[TOKYO] Japan's Prime Minister Shinzo Abe will raise wages for day care and retirement home staff to lure workers to two sectors that face labour shortages and to counter criticism that his policies have yet to benefit average citizens.

The government is also considering shopping vouchers for households in what it calls a "redistribution of wealth" intended to revitalise its economic agenda before parliamentary elections later this year.

Mr Abe is placing renewed focus on his economic agenda to reflate the economy and shake off decades of stagnation, known as "Abenomics" before upper house elections in July.

"In order to secure more workers for day care and elderly care, I want to focus on three areas: improving working conditions, improving on-the-job training and lowering the burden on the workforce by raising productivity," Mr Abe said at a meeting with members of his cabinet.

Mr Abe ordered cabinet ministers on Tuesday to raise wages for day care workers by 2 per cent in the budget for next fiscal year, which starts in April 2017.

That is on top of a 2 per cent increase in an extra budget for last fiscal year, which would take the total pay increase to 4 per cent.

The government has been encouraging more mothers to return to the workforce after childbirth, but day care centres are struggling to meet the surge in demand because they cannot attract enough workers due to low pay.

Day care workers, who are mostly female, make an average of 268,000 yen (S$3270.70) a month, below an average of 311,000 yen per month that women employed in other sectors make, government data show.

A 4 per cent increase will not be enough to close this gap, so the government and its advisers hope to raise wages more in the future, a government official told reporters.

Economists say the policies, which will be included in the government's annual growth strategy, do not go far enough to bolster consumer spending or to reverse a decline in the labour force needed to get growth back on track.

"Raising wages is the right thing to do, but this will not impact economic growth," said Hiroshi Shiraishi, senior economist at BNP Paribas Securities. "Households are unlikely to spend extra money when they are worried about the future, especially when they know the handouts are being financed by government debt."

Mr Abe's administration will also raise pay for retirement home workers from next fiscal year to eliminate the pay gap with comparable positions in the private sector.

The government said on Monday it could issue spending vouchers to some households to try to bolster flagging consumption, but the ruling Liberal Democratic Party has used a similar policy in the past to little effect.

REUTERS