On September 27, the Japanese government announced measures to solve the problem of “annual income barriers.” For the “barrier of 1.06 million yen,” which obligates part-time workers employed by companies having 101 or more employees to pay social insurance, companies that took measures to prevent a decrease in the amount of the workers’ net income, for example, by rising wages and providing compensation of them, will receive subsidies of up to 500,000 yen per employee. Also, regarding the “barrier of 1.3 million yen,” where part-time employees working at companies having less than 100 employees are not allowed to be dependent on their spouses, the employees will be able to remain as dependents for two consecutive years even if their wages exceed the amount of the “barrier,” at the discretion of health insurance societies or other organizations.

According to the document from the 7th Pension Subcommittee of the Social Security Council, which is estimated by the Ministry of Health, Labor and Welfare (MHLW), there are approximately 450,000 part-time workers who may have been controlling their working hours because of the “barrier of 1.05 million yen.” Particularly, in the distribution industry and the service industry, facing chronic labor shortage, there was an urgent need to change the system where “those who work more suffer a loss” if their annual income is somewhere between 1.06 and 1.25 million yen. To solve this problem, the government's “Children’s Conference of the Future” also announced its policy that corrective actions would be taken from the next fiscal year after finalizing them during the current fiscal year. However, due to concerns that the increase in the minimum hourly wage, effective from this October, may cause further adjustment of working hours, the measures to address the problem of “annual income barriers” have been implemented earlier than originally scheduled.

Implementing these measures this time is good news for part-time workers who “want to work more,” and will have a certain effect on the labor shortage in workplaces. However, the essence of the issue lies in the system of “Category 3 Insured Persons” itself. This system was introduced in 1986 as a measure to prevent homemakers in middle-income households, who had supported the postwar economy in Japan, from receiving no pensions. However, the “sense of being benefitted” by being dependent made women's participation delayed in society as a result. To begin with, this system does not apply to spouses of self-employed persons and does not benefit singles or dual-income households working full-time. Further, it also makes me unsatisfied that I have to bear the burden of pension resources of homemakers who do not pay their insurance premiums.

Another negative effect is that the existence of part-time employees who do not want to increase their annual income has been functioning as a “tacit driver” of suppressing the level of hourly wages. For a long time, companies have been receiving the benefit of the expansion of low-wage non-regular employees such as part-time workers. However, when the inflow of new part-time employees shrinks along with the decline in the working population, employers face the business risk of labor shortage. Reform of the pension system is scheduled to be completed in 2025. I hope that the government will show us a sustainable social security system focusing on changes in industries, households, working styles, and demographics. The current system is unlikely to be abolished immediately. It is necessary to secure sufficient resources to realize a smooth transition to the new system. This means that companies are also expected to greatly strengthen their earning power.

This Week’s Focus, September 29

Takashi Mizukoshi, the President