Sustaining social security system requires all generations to chip in
Japan's rapidly aging population and chronically low birthrate have cast a dark shadow on the nation's social security system--it has become unclear whether pension, health care, elderly care and other services can be maintained in the future.
Due to anxiety about the future, the public has become caught up in a mentality to curb spending and increase savings, which has been one reason for the economic slump. We urge Prime Minister Shinzo Abe and his Cabinet to speed up their efforts to rebuild public trust in the social security system.
The Cabinet must give top priority to steadily implementing integrated reform of the social security and tax systems, centering on raising the consumption tax rate. Additional tax revenues will become a funding source for basic pension payments, health care and other welfare services. It will be a major step toward maintaining the social security system.
However, it is obvious that such reform--although necessary--is not sufficient to resolve the problem. It will be crucial to implement steps to turn around the low birthrate as a part of long-term reform based on a farsighted viewpoint.
Spend more on children
Japan's social security programs have so far provided solid services to the elderly, such as substantial pension payments. On the other hand, measures to tackle the low birthrate have been poor.
The state coffers are expected to collect an additional 13.5 trillion yen due to the consumption tax increase, and under the integrated reform, 700 billion yen will be used to support child-rearing. However, the money to be spent on child-rearing is nowhere near what was spent by France, Sweden and other nations that successfully conquered their own low birthrate problems.
Japan's most recent total fertility rate--the average number of children each woman has in her lifetime--was 1.39, one of the lowest among advanced nations. Due to the low birthrate, the nation's population is expected to drop by more than 30 percent over the next 50 years, and by about two-thirds in 100 years.
If the government is unable to increase the birthrate, the labor force will drop significantly. As a result, the working generation will have to bear a heavier burden to keep social security programs running. It also will hurt economic growth and diminish social vitality.
Many women are still forced to quit their jobs when they have babies. This situation must be changed. Concern about losing their jobs has become one reason some women hesitate to have children. The government must urgently create an environment in which women can work without anxieties, such as by boosting child care services and increasing income compensation for women taking child care leave.
During a recent press conference, Abe said one of his administration's tasks is to make Japan a nation where more women can have successful careers and feel comfortable having and raising children. During the administrations of the Democratic Party of Japan, 10 politicians held the post of state minister for measures for the declining birthrate in three years and three months. We urge the Abe administration to learn from this awful example and powerfully promote measures to rectify the low birthrate.
Help nonregular workers
The increase in nonregular workers has also become another problem for social security. The ranks of nonregular workers, such as part-time and temporary workers, recently exceeded 18 million--35 percent of the total workforce.
Many businesses do not apply social insurance programs--such as pension, medical and employment insurance--to their nonregular employees. The increase in the number of workers not obliged to pay social insurance premiums undermines the foundation of the social security system that is sustained by these premiums.
There is wide concern these nonregular workers will face severe lifestyle constraints if they lose their jobs or become ill, and will end up being entitled to only a small pension--or no pension at all.
Nonregular workers are more likely to be axed first in corporate restructuring. Many find it difficult to get married due to financial reasons. The proportion of married nonregular workers in their 30s is about half that of regular employees in the same age bracket. This causes a vicious circle that accelerates the decline in the birthrate.
Expanding employee pension plans and social insurance programs to nonregular workers and correcting the gap in wages between regular and nonregular workers are major challenges.
At a news conference after his recent appointment as health, labor and welfare minister, Norihisa Tamura said his ministry "will also deal with the employment issue wholeheartedly" to revitalize the economy. This is a reasonable statement. We hope the labor ministry will knuckle down to the task of improving the treatment of nonregular workers.
Bearing appropriate burdens
To ensure the social security system is sustainable, every member of the population--young and old, regardless of generation--will need to bear a burden commensurate with their financial abilities. In particular need of an overhaul is the pension system.
Tax deductions from public pensions are considerable, so pensioners pay far less tax than do employees whose income is around the same as that of pensioners. It will be necessary to rectify this gap by strengthening taxation on pensioners.
This is not the sole problem. Patients aged 70 to 74 have been temporarily allowed to pay 10 percent of their medical bills from their own pocket, instead of the legally set rate of 20 percent. As a consequence, the proportion of income people in this age bracket use for medical expenses is smaller than that used by people in age groups on either side of them. We think the burden should be raised to 20 percent for people in the 70-74 bracket, as is legally provided for.
Under the current nursing care insurance system, service recipients who need only relatively little help pay 10 percent of the costs--the same level as people requiring a higher level of assistance. Consideration must be given to raising the rate shouldered by the former.
Cuts in pension benefits will be unavoidable.
A system was introduced in 2004 to keep the growth rates for public pensions below those for wages and prices. But the system has never been enforced. It should be implemented as early as possible.
In reality, however, there are large income gaps among pensioners, and many of them rely on basic pension benefits for living expenses. So when the consumption tax rate is raised, it will be crucial to implement measures for low-income earners, such as introducing lower rates for daily living necessities.
(From The Yomiuri Shimbun, Dec. 31, 2012)