--The Asahi Shimbun, Dec. 15
EDITORIAL: Pension benefit cuts

The Ministry of Health, Labor and Welfare has decided to lower public pension benefit payments in the coming fiscal year, the first such cut in five years. As a measure in line with the rule of fair distribution among different generations, this move can be seen as inevitable.

The decision to reduce payouts stems from the forecast that this year's commodity prices will dip below the standard previously set. The move thus reflects the current state of deflation to a certain degree. But even so, this measure will not produce a fair sharing of intergenerational burdens and benefits.

Up to now, adjustments have been made in the interest of preventing the value of pension receipts from falling in comparison to prices and wages to the greatest degree possible. Yet in effect, measures aimed at protecting the rights of current recipients have effectively shunted the weight of the system onto the backs of future generations. This aspect of the policy measure begs closer scrutiny.

Under the current system, reformed in 2004, a plan known as the "macroeconomic slide" was introduced to stabilize pension finances over the long term.

The idea was to limit the rise in pension payments to senior citizens, even if the wages of the working generation and commodity prices increased. This was an attempt to curb the increase in premiums if only to a slight degree. In an aging society with a falling birthrate, failure to take such action will place an excessively heavy burden on the younger generation.

Unfortunately, the impact of the global recession and other developments ensued, while prolonged deflation and price and wage slumps dragged on. As a result, the envisioned automatic adjustment mechanism has yet to kick in.

Against this backdrop, there has been a relative rise in the pension level for seniors. According to 2004 estimates, the level of pension benefits as a ratio of take-home pay for the current working generation was expected to decline from 59 percent in 2004 to 57 percent in 2009. An examination of the statistics in 2009, however, shows a rise in that payout level to 62 percent.

The primary reason for that gain is the failure to reflect past commodity price falls. The sole purpose of the determined benefit cuts, therefore, can be seen in the context of bringing the pension benefits closer to the level of what it should be.

Any further delay in such adjustments will prompt a major slide in the next generation's pension benefits. To prevent that, substantial tax and premium hikes will be necessary.

Considerations will naturally be necessary to prevent any sharp drops in payments to elderly people whose only real source of income is their pension. Then again, upsetting the balance with the working generation for that purpose would be a case of putting the proverbial cart before the horse.

This is an issue impossible to sidestep when pondering integrated social security and tax reforms. Pensioners can also be expected to protest any cuts in their benefits.

Yet we must also remember that the very foundation of a public pension system lies in mutual assistance between generations. We look forward to an approach conceived in the spirit of sharing the collective burden that will be acceptable to both senior citizens and the younger generation.

In the political arena, there is a tendency to grow fainthearted about cutting benefits for senior citizens out of concerns about the impact at the polls. Acting with such timidity, however, will prevent leaders from ever living up to their responsibilities.

by kiyoshimat | 2010-12-17 07:31 | 英字新聞

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