Japan To Subsidize 100% Of Salaries At Small Companies

Economy Program aims to pay 10m laid-off workers their full wagesRINTARO TOBITA, Nikkei staff writer April 24, 2020 21:15 JST Updated on April 25, 2020 06:08 JST Many eateries and other small businesses have been asked to shut down or keep shorter hours for now.   © Reuters TOKYO — Japan is working on a…

Category:

Description

                Economy             

Program aims to pay 10 m laid-off workers their full wages

RINTARO TOBITA, Nikkei staff writer

                            Many eateries and other small businesses have been asked to shut down or keep shorter hours for now.     © Reuters                               

TOKYO – Japan is working on a subsidy to ensure that temporarily idled small-business employees receive 100% of their wages during the current state of emergency, Nikkei has learned.

The Ministry of Health, Labor and Welfare plans to use an existing employment adjustment subsidy, which helps enterprises seeing no choice but to temporarily lay off workers continue to pay them , at least in part.

As things stand, laid-off workers at companies that have halted operations are entitled to at least 60% of their regular pay. The government shoulders up to 90% of this to keep them from being dismissed outright, with the company chipping in the other 10%.

Many employers try to save money by sticking to the 60% minimum and asking the government to pay 90% of it.

The offer will be more generous going forward. If small companies – those in the service sector with up to five workers and manufacturers with up to 20 – are asked by the central or local government to temporarily shutter operations, and they apply for the employment adjustment subsidy, the government will shoulder the full cost as long as the businesses pay 100% of last year’s wage levels.

With companies not having to pay anything out of pocket, most will choose the 100% option, the government figures.

The Tokyo Metropolitan Government and other localities across Japan have asked restaurants and other businesses to close or shorten hours during the health crisis. The central government financial support aims to maintain the income levels of workers in these industries.

The subsidy program’s parameters will cover 3 million companies and about 10 million employees.

The employment adjustment subsidy has not proved popular so far, partly owing to its complicated paperwork and the roughly one-month wait for processing applications. In the current crisis, just 985 companies had applied in the two months leading up to April 17.

Sign up to our newsletters to get our best stories delivered straight to your inbox.

Read More

Reviews

  1. gen3

    > The employment adjustment subsidy has not proved popular so far, partly owing to its complicated paperwork and the roughly one-month wait for processing applications. In the current crisis, just 985 companies had applied in the two months leading up to April 17

    The wait time on this seems very long. I wonder why? Lack of staff? I guess its good that they already had a program going, instead of having to build one from scratch or do what the US has done and partner with banks (Which seems to have also been plagued with hurtles)

  2. tempsy

    Coming to the realization that our economic crisis (primarily massive number of newly unemployed) was largely avoidable with a scheme like this vs the PPP loan program and multi-trillion money printing we got instead.

  3. johnzim

    Given that the BoJ literally can't seem to generate inflation no matter how hard it tries, this seems like a no-brainer. As close to helicopter money as they've yet come.

  4. millstone

    No insight into Japan, but the US in particular should be aggressively shoveling money at business payroll as well. Some reasons why:

    First is to keep workers out of state unemployment insurance programs. These differ per state, but are often deliberately miserly and/or burdensome so that they motivate recipients to go find a new job. But we don't want the unemployed to hit the bricks. Payroll support is then a more easily-administered form of federal UI. (Plus state UI is written in COBOL, they will literally crash.)

    Also, retaining workers will help to ensure a V-shaped economic recovery. Once the health crisis ends, retained workers can just go back to work. But layoffs followed by rehires means more retraining (not retaining), and a slower recovery.

    The point is that we literally cannot pinch pennies now: anything we "save" will hit us twice as hard as a new entitlement cost, or a cost to the states, or in reduced tax revenue, or whatnot.

    Money is a fiction; the real risk is mouldering factories and disused skills. If a year from now the US is trillions more in debt, and prices are 2% higher, YET we are healthy and working and productive, we will have been successful in countering the health and economic crisis. We should be so lucky.

  5. ethanbond

    1. Cancel rent payments, mortgage payments, and property taxes. People simply stop paying and stay where they are, no enforcement burden and no distribution necessary.

    2. For landlords who cannot sustain the loss of cash flow, offer to buy them out at market price and then hire them as property managers for their previously owned properties.

    With essentially zero overhead, you've eliminated small business's first or second largest expense (payroll and rent). If they still can't make payroll, it's not a super huge deal since those employees also have their rent frozen.

    Now the economy can hibernate.

    When we're ready to resuscitate it, do a direct stimulus check as you reopen businesses. Let money start flowing without any component going to rent for some amount of time until we're back on solid footing.

  6. Proven

    Wonderful! Why do we still have to work again?

    It won't be very long before Magic Money Tree loses to toilet paper, pound-for-pound.

  7. siruncledrew

    Japan has a good bottom-up focus by addressing employee payroll and by proxy employee/employer job security during a negative economic outlook.

    Grassroots money instead of helicopter money.

    The government directly intervening to support employees sounds like a better effort to influence widespread impact than propping up employers to trickle down the money with vague guidelines and questionable oversight.

    Businesses, in particular SMBs still need financial help, but that help should be separate from the public support help for PTEs and FTEs.

    The US still clings on to the top-down approach to solve these problems, counter to Japan (not that Japan is perfect either).

  8. tsbinz

    Germany/Austria/Switzerland have similar programs (called Kurzarbeit) which are for situations like these (where companies don't have enough work at the moment but are believed to recover), en.wikipedia.org/wiki/Short-time_working – what was done for the covid crisis here (Switzerland) was to simplify the application process for it.

  9. throwaway122378

    This will prove ineffective in a few months. Not all 100% Of jobs lost are coming back.

  10. nl

    Australia has a similar program, but universally applicable (not just small companies) to any company which can show negative effects from COVID-19.

    They subsidise salaries at a flat rate of $1500/fortnight.

  11. drallison

    The Danish approach to closing down the economy in the face of a pandemic made more sense to me than that used by Trump and the US Administration. theatlantic.com/ideas/archive/2020/03/denmark-freezing-its-economy-should-us/608533/

  12. throwawaysea

    Perhaps what we need to consider is some scheme to automatically fund a salary floor or salary continuation in emergency times, even if UBI is not on the immediate horizon. Presumably the currency dilution that results is no worse than what we are taking up anyways with the current piecemeal stimulus packages.

  13. yalogin

    Our trickle down economics philosophy in the US does not let the government do this. The onus will be on propping up businesses, when all they need to do was support employees. Instead we bail out whole companies and that usually means paying a lot more than just employee salaries.

  14. joebloom

    UK was early out of the doors with 80% wages furlough.

    It gives both employees and businesses the ability to survive the period and come out of the other end able to get straight back into work.

    But who knows how long that lasts whilst there is a likely recession on the cards next.

    And so the government takes on 100 years of debt by giving future taxes to lenders.

  15. crimsonalucard

    Makes a lot more sense then bailing out companies.

  16. dhasso

    After the announce of 100k yens per people (~$1000), they might finally become more serious…

  17. sunsetSamurai

    Every time I read news like this, I wonder where all that money is coming from? As far as I know, Japan is one of the most indebted countries out there. Look at the USA too, they've printed like 2 trillion dollars during this crisis, my own country has a dept of around 50% of its GDP.

    I feel like most countries have not intention of paying their debt ever, the politicians are just kicking the can down the road until one day all this explodes and all this debt is forgotten, maybe?

    There's probably something I'm missing since I am not an economist.

  18. adev_

    The government is making the right move.

    Japan has in its economy a large number of small family business in sector like retail, crafting, Ryokan (hotels) or restaurants.
    Some of them are two centuries old and still surviving from generations to generations.

    They are part of soul of Japan and its cultural identity. Loosing them would be such a waste, not only socially but also culturally.

    Many of them have seen their income going to close to Zero due to COVID19. Without government help, many of them would die and never recover.

  19. hnarn

    In an extremely simplified way, from an economic standpoint, I see two ways this crisis can be handled:

    1) Shovel money into businesses essentially free of charge, taking over responsibility for their payroll, giving generous low percentage loans or even free grants, and anything else that can simply be considered "free money" for company owners.

    Or:

    2) See this for what it is, which is an extremely high-risk investment that no-one else is willing to make. If a company was able to find a better deal on the market, they would take it. If companies are forced to apply for help from the state to survive, the state should get a (minority) share of the company and reap any potential future benefits until the owners have the money to buy their shares back.

    The way I see it, in #1 we do our best to halt the crisis, but we essentially do it by giving away free money to corporations and small companies. In #2, we still do the same thing (because there's in most cases not much difference between a high-risk investment and a gift), but at least in this case the tax payer may get something for it in the future.

    If public money goes to bailing out private companies, the public deserves a share of future profits, until those companies can buy the shares back at market value. I don't see a loser in this scenario, and in fact, it would be refreshing to see and end to this constant policy of "privatize profit, socialize loss".

  20. gigatexal

    I’ve been saying this for weeks now: just have the treasury pay employees so that people stay in their jobs and can keep buying.

  21. m3kw9

    Basically it sounds good but the application process is a nightmare

  22. perfunctory

    This might be the right thing to do at the moment. In the long term though I'd prefer a system where stimulus package is not based on one's employment. This has the same problems as employer-tied health insurance.

Add a review

Your email address will not be published. Required fields are marked *

Vendor Information

  • Store Name: PLATINUM BLUE DREAM
  • Vendor: Platinum
  • Address:
  • No ratings found yet!