Japan’s jobless rate fell to a 20-year low in October, but consumer spending and incomes also edged down as the tight labour market failed to spur significant increases in wages.

The latest figures are likely to help Shinzo Abe as the prime minister tries to cajole companies into offering higher wages, to accelerate inflation by raising consumer demand through higher incomes.

So far, short-handed employers have resorted to use of overtime and hiring more temporary workers, seeking to avoid increases in base wages that would be difficult to reverse if the economy takes a turn for the worse.

The government reported on Friday that unemployment in the world’s number three economy dipped to 3.1% in October, compared with 3.4% in September. It was the lowest level since July 1995.

Consumer spending fell 2.4% from the same month a year earlier and average incomes fell 0.9%.

Japan’s inflation rate was lower in October, with core inflation excluding volatile food prices down 0.1% for the third month in a row.

The success of the government’s “Abenomics” policies hinges on getting consumers and companies spend to more. Abe has also launched social welfare initiatives aimed at easing the burden of child care and elder care to help encourage more women to work.

This week Abe appealed to business leaders to offer bigger wage increases during next year’s spring shunto, or “labour offensive”, when unions and companies hash out pay agreements for the year.

Abe has pledged to slash corporate taxes in exchange for progress on wages. The government also intends to raise the minimum wage, which is now at a modest 798 yen ($6.50/£4.30) an hour on average, by 3% a year, aiming to get it up to 1,000 yen ($8.15) an hour by 2020.

Big companies, reaping record profits thanks to strong export earnings, can afford that. However most people paid the minimum wage worked for small and medium-size companies that could not afford to pay more, said economist Masamichi Adachi of JPMorgan.

“Those small tiny firms, which are always losing money and don’t pay taxes, are not making money at all. If they have to raise wages their losses will grow and they will find it hard to survive,” he said.