Market and Social Solidarity in the 21st Century Japan
In December 1993, RIALS initiated its Research Committee on the Welfare Society, which was at that point chaired by Kenichi Miyazawa, director of the Social Security Research Institute. Over a two year span, the committee, focusing on the linkage between welfare and the economy, accumulated research data on the following four topics: 1) the reformation of Japan's socio-economic systems; 2) a conceptual vision of the welfare society and the steps necessary in achieving it; 3) the systemization of the new welfare economic society; and 4) the workings of the market economy and how best to create a social solidarity. The results of this research have been compiled in this report, "Towards a Welfare Economic Society."
The following is an overview of the key points of the report.
<6 key points of the report>
(1) A presentation of the fundamental systems for 21st century Japan:
Before Japan as a nation comes up against the dual burden--a demographic inverse bell curve--of the "Graying society" and declining birth rates, we sought to find the ideal means of correcting flaws within the Japanese socio-economic system. We defined this path for Japan's future socio-economic systems as the welfare economic society, one which can smoothly adapt to an era of harsh global competition, and also clarified how best to draw the balance between the market economy and a system of social solidarity.
(2) The optimum combination of both welfare and economic (market) principles, using crises suffered by other welfare states as reference:
Welfare and economic market principles complement one another, rather than standing at opposite poles. We conceived a maintainable social system which incorporates the precepts of universal welfare, so as to find the proper balance of those two seemingly opposite sets of principles; a system which, accounting for the transitions in social structure which confront Japan as it enters the 21st century, incorporates the following factors: the increasing numbers of both senior citizens and youths under employment age, the decreasing number of marriages and the downtrend in the size of the average household, the advances of women in the work force, and the increasing emphasis on the individual.
(3) The construction of the welfare society by the citizens and workers themselves:
In July 1995, the Committee on Social Security Systems issued the following recommendation: to outline the creation of a sophisticated welfare society by incorporating the ideas of the workers themselves, rather than heeding such mistaken notions as that welfare systems are inherently insufficient, or that Asia itself is incompatible with the concept of a welfare society, or with systems which place emphasis on the freedoms of the individual.
(4) The rate of burden by the populace as not equal to that of the state--the interchangeable relationship between private and public burden:
Finance authorities have emphasized the need to trim welfare due to the growing rate of the burden being absorbed by taxpayers. However, in actuality, this refers to the rate to be borne by the state, but the result of this logic is that the total of both private and public burden is being forced upon the working class, e.g., such societal costs as those due to the increased number of senior citizens and youths. What is necessary to grasp here is the substitute relationship between public (state) burden and that borne by private households. Thus the debate which places the amount of private burden at roughly 50% is mistaken, for it fails to account for the provision by state finance and social security of social services or for the proper method of income redistribution.
(5) The construction of a welfare society is possible even when accounting for a declining economic growth rate and for the "graying society":
Although it is commonly held that the declining growth rate and the shifting demographic structure will lead to a bankruptcy of welfare systems such as the national pension, and to a decrease in real income due to the increased burden on the taxpayers, we clarified that this can be avoided through both an econometric check and the correct social policy structure.
(6) The structure of social security and the role of unions:
Unions, which during the postwar reconstruction were expected to play an essential role in the formation of the social security system, have failed to fulfill that responsibility. We propose that unions, as based upon a grand design for the Japanese society of the 21st century, must come to the fore to play an essential role in this structural formation as a vehicle of national consensus.
Introduction: Points of Issue in the Creation of a New Welfare Economy
As Japan enters an era of rapid societal transformation unheard of in other advanced nations, i.e., the dual trend of a "graying society" and declining birth rates, the creation of a social structure able to adapt to these phenomena is the issue at hand. Moreover, in doing so, Japan must also refer to the experiences of other welfare states, such points of deadlock or those requiring readjustment of policy. It will also be imperative to re-examine from the ground up the relation between welfare and the economy, and that of economy and society.
The Committee on Social Security Systems issued an overall policy vision on the reformation of Japans social security system as it enters the 21st century, entitled "The Reconstruction of Social Security: To Build a Secure 21st Century Society." In doing so, the committee, while giving flesh to such elements as historical and issue awareness and to the proposal itself, compiled research on the structure of social security and on social organizations, while also taking into account the role of labor. The research itself was conducted from the viewpoint of the taxpayers and laborers themselves. At RIALS as well, since initiating the Research Committee on the Welfare Society, we have begun research on the definition of such as issues as the above as a part of the shift to an economic society which places emphasis on quality of life.
By gaining the cooperation of both researchers and scholars, we were able to expand upon the concept of the welfare society from three viewpoints: 1) a fundamental overview; 2) an examination of reform issues and the role of labor; and 3) an examination of the issues of employment, finance, tax policy, and nursing systems, among others. We summarized these and presented them here as "The Shift to A Welfare Society," a continuation of 1993`s "The Shape of the Future," which gave an overview of a society of solidarity which also respects the freedoms of the individual. We present this outline of the workings of the market economy and the formation of a system of social solidarity as an alternative to neoclassicist laissez-faire economics.
Welfare and Its Place in the Modern Economy--Welfare and the Market
In the past, welfare occupied only a minor position within the national economy. However, in the second half of the 20th century, welfare has moved beyond merely being an instrument utilized in cases of extreme poverty. Rather, welfare has acquired a broader definition, as shown by the ratio of public expenditures to GDP in the nations of Europe--where over 50% of expenditures are occupied by welfare--, and in Japan and America as well, which trail behind but still are approaching 40%. Japan's ratio of social security expenditures to GDP had reached 14.7% (e68.5 trillion) as of 1992, which highlights its rapid expansion when compared to its ratio of less than 5% a mere 25 years ago in 1970.
At present, social security has far outgrown its traditional role as a limited sector of the market economy, and has come to play a pillar role. Indeed, welfare itself has become linked to the market economy. Although the relationship between welfare and the economy was previously regarded as a trade-off of sorts, welfare has now been internalized into the modern economy, leading to analysis of how best to manipulate their mutual relationship, and of how to find their balance.
The Triple Role of Social Security--Cushioning Social Risk, Lessening Insecurity, and Creating a Maintainable Society
A societal safety net of sorts which operates on principles differing from those of private insurance is necessary in terms of maintaining a stable lifestyle in such cases as the following: 1) as a shock absorber for the market economy, such as in the case of individual unemployment, corporate bankruptcy, or imbalances in medical care; 2) as a guarantee against long-term insecurity due to unforeseeable events such as market collapse on a major scale or natural disasters such massive earthquakes; and 3) in the case of a reverse course, i.e., a case when insurance fails through due excess costs arising from claims from high-risk accounts. This is the unique role of social security and social insurance. Moreover, as the mutual-aid functions of such cooperative-style media as the corporation and the family gradually wither, the emphasis on the independence of the individual will continue to grow. This breeds the necessity of a means collateral of sorts--which can guarantee a maintainable society of unity, and prevent its further splintering. As such, the role of welfare and social security in the modern society has evolved from its previous focus on poverty aid and prevention, and rather is becoming a means of ensuring the freedom and equality of men, as well as forming and preserving social order. Thus, social security should be defined as the ideal method provided by society towards the absorption of risk inherent to market economies, and in maintaining social stability. To rephrase, social security should be redefined as "solidarity of systems," rather than "solidarity of beliefs."
Social Policies and Social Security--The Foundation for Reform of the Japanese economic society
In recent years, Japan's existing socio-economic systems have come under question. This consists in part of a rethinking of the role of a variety of elements, which have until present supported the notion, that the economy and industry come before all else. These consist of the uncertainty as to where the reins of power lie amongst the trio of the administration, bureaucracy, and finance, overly centralized social systems, and societal and political methods which have tended to ignore individuals or to lump the populace as one great mass. In addition, as demand for a government, which emphasizes quality of life increases, this review also includes a second look at Japan's corporation-oriented society.
Moreover, the impact of the demographic shifts described above--the dual trend of the "graying society" and declining birth rates--will not only force both the revision and reinforcement of Japan's current welfare systems, such as medical care and pensions, but will also necessitate an overhaul of the social security system as a whole. What is more, if the peaking of the growth of Japanese industry and the necessity for a structural revision are both factored in, this will deliver a massive impact on Japanese socio-economic systems overall, including both employment systems and corporate structure. The result will necessitate a societal readjustment.
This will also require a reversal of perspective: that social security should not passively exist underneath the umbrella of the industrialized society, but rather should be reformed by active pressure on the part of both the people of Japan and from within social security itself.
A Stable Social Security and Flexible Response to a Changing Social Structure
The key to structuring a maintainable social security system in which both economic and welfare principles can coexist consists of three parts.
The first is the maintenance of a certain level of economic growth per capita, i.e., labor productivity. In other words, it is necessary to recreate a business environment through investment in social and data infrastructure, as well as in human resources. This in turn would promote technical advances while also ensuring the financial resources (i.e., savings rates) necessary for investment.
The second element is a demographic ratio: that between the population of working age and the dependent population. To rephrase, the essential factor in this is to prevent any further growth of the non-working population, lest it alter the ratio between the labor force and the non-working population. Since the advent of the "graying society" has put the non-working population on a growth trend, an important role for social security in the future will be to increase the rate of women who enter the work force, and to increase employment opportunities for senior citizens with the will to work.
Declining birth rates also clearly tie in with this. Moreover, a major factor behind this phenomenon lies in Japan's traditional social systems and customs. As such, the structuring of a society with gender equality will not just bear its original meaning of equality among men, but will also bear a positive socio-economic impact in terms of avoiding further growth in the non-working population under working age.
A New Insecurity, and the Structure of Public Nursing Systems
Among the recommendations issued by the Committee on Social Security Systems, one point which received particular attention was its bold outline of nursing care systems for senior citizens. This particular sector has essentially been a void, which is a reflection upon Japan's obsolete postwar social security system. Moreover, it is forecast that Japan, as the nation with the world's longest average life span, will soon surpass the levels established by the nations of northern Europe and set a new standard as the "graying society" unfolds. This in turn will necessitate a vitalization of systems by which to adapt to this.
Care for senior citizens has become a major issue in recent years, and was triggered through attention on standards of living, such as comfort, overall prosperity, as well as on a society of equality. Through this, debate has been raised over the reform of systems so as to emphasize quality of living, and the view that government should place policy emphasis on such has become the norm. Although it is held that Japan has achieved the world's highest standard of living, this is not noticeable in terms of actual quality of life or quality of social infrastructure. The factor raised as the major cause of this, as gained through various surveys on lifestyles, has been the insecurity felt by senior citizens. This insecurity is not necessarily financial, as can be seen by their high rates of savings, but rather is one due to insecurity regarding nursing care systems or that due to living alone. This has been repeatedly dubbed "the new insecurity."
With the advent of the "graying society," the number of those requiring nursing care is certain to grow sharply. In the past, care for senior citizens was marked by the relatively low numbers of those who required it, and was also generally a short-term matter. However, with the lengthening of the average life span, nursing care will no longer be the exception to the rule, and will also unavoidably become a long-term affair.
When looked at in this fashion, the risk that nursing care will in general become a requirement must be acknowledged, even in the case of those who do not require care for specific illnesses. As such, the necessity to improve public nursing care systems is attributable to the changes in Japanese social structure, in the structure of the average household, and the broadening in scale of the nursing care issue itself.
A major factor amongst all this is the issue of whether the fundamental structure of the nursing care system, as part of social security, is built upon principles of individual equality. In the past, when the national health care system was first implemented, it drew criticism due to the lack of medical care to accompany the insurance plan itself. This, however, led to a nationwide movement to distribute medical care facilities to those towns and villages which had previously lacked them. There are parallels to be drawn in today's nursing care system--that there is a lack of full services to accompany the insurance itself. When looked at in those terms, emphasis should be placed upon how best to construct a social security system of solidarity, so as it will gain both trust and support. This must first stem from the full public disclosure of information, and through the creation of a "transparent" system--one clear to the insured parties. After the construction of a basic format for the system, extensive tinkering on a trial and error basis will likely be necessary, but it is clearly possible to construct a system of high-quality health care without precedent in the world.
Training of Qualified Welfare Personnel and the Laying of a Welfare Infrastructure
Manpower--trained personnel--has proven to be the major hurdle to a quality welfare system. To resolve this, it is necessary to shed the notion that welfare differs from medical care in that untrained, inexperienced, and low-paid personnel will suffice--which is obviously not the case. Specifically, all personnel, be they part-time help or volunteers, need to have full background knowledge and technical skills, not only in the case of those involved in care management, but also in the case of those who deal directly with senior citizens at nursing and welfare facilities. Above all else, it is necessary to implement thorough training of personnel so as to provide care with both empathy and a strong sense of ethics. In doing so, upon creating a plan to procure the manpower forecast by both the state and the municipal bodies, the first steps will be to retrain attendants and working housewives from the private sector, and to provide systematic training through public expenditure for gaining the necessary qualifications. Such personnel are necessary in a variety of welfare care services, be it public, private, or a non-profit organization (NPOs). However, at present, most organizations are characterized by poor and dubious labor conditions. As such, in actuality, welfare is lagging behind in terms of establishing the requisite societal standards for care, giving rise to demands for a systematic adaptation by the state, municipal bodies, welfare organizations, labor administration, and related trade unions. In addition, pressure for the laying of full welfare infrastructure and the creation of comprehensive, universal welfare is also growing.
Linkages Through a Welfare Network--Public, Profit, and of Non-profit Organizations
The social security system of the 21st century must possess the flexibility necessary in adapting to changes in business climate and conditions. This is a basic requirement in securing stability for each member of society, and in maintaining solid financial resources and economic soundness, both as defined in macro-economic terms. The experiences of the welfare states of Western Europe, which constructed adaptive systems through a process of trial and error, should prove to be a useful resource. What needs to be done in the time ahead is to wipe away the flaws inherent within the Japanese postwar social security system, and to firmly establish a common consciousness within society regarding the nature of modern social security, i.e., of universal welfare and the collective shouldering of the burden it entails. This process is based upon gaining the cooperation of the authorities involved and the systematic provision of data regarding social security itself--both of which are essential in crafting a responsive and flexible system.
The establishment of a conductor--a core for the system--, and the institution of a network which would comprise the public sector, NPOs, the "informal" sector, i.e. households, and profit-based organizations is a part of doing this. This consolidation of organizations would lead to a geometric leap in results, through the following three benefits: 1) the shared usage of data; 2) the implementation of a shared network; and 3) the economics of consolidation. This kind of interactive contact between network users would give rise to an increase in trust towards the institution of social security itself, and also raise accordingly the quality of the welfare services provided. The municipal governments are expected to take the lead in creating this systematic sharing of burden and in fostering relationships of cooperation. However, it is also likely that the promotion of equal conditions for the public and private sectors, and especially for NPOs, will foster a spontaneous building up of networking capacity between these three sectors. Accordingly, in the provision of welfare services, it will prove important to make the shift from a conventional top-down structure for policy to a horizontal one, which links in with the ideas of the users on the network.
Reconsidering the Roles of Government and Taxpayers
In the second half of the 20th century, public expenditures by the governments of the advanced economic powers made immense leaps, and it is a well-known fact that the ratio of social insurance and tax upon national economies also grew in conjunction with this. In the case of Japan, debate has taken a form not witnessed until recently in the western powers--how to best calculate government burden, which is composed of tax revenues and social insurance premiums. There are sizable gaps among the various nations, ranging from the case of Sweden, where state burden is over 70% of national income, to that of the US and Japan, where state burden is slightly less than 40%.
It is easy to misinterpret what exactly is meant by government burden in the case of Japan, where it is formed chiefly of tax revenue and social insurance premiums. The most accurate way of treating this is to interpret it through its original meaning--the portion of social costs, which is borne by the government. That is to say, the notion that the increased government burden necessitated by the "graying society" will in turn reduce socio-economic capacity is a mistaken one, as shown by the fact that the total private and public societal cost burden remains fundamentally unchanging, be it in the case of individual households or the private sector, or in the case of the public sector or society as a whole. This is due to the fact that the cost absorbed by society as a whole will rise, even if the amount of government (public) burden is suppressed and instead placed upon the private sector.
Amongst the costs to be absorbed by private households, the amount of income lost due to the increase in senior citizens and declining birth rates perhaps deserves more attention than the fees directly paid for their nursing care or child care. In sum, although the bulk of this is being covered by women in the work force, the fact remains that income to be gained through labor will be lost without private work within the household. Moreover, a substantial cost is kept under veils in the case that nursing for senior citizens is kept within the household.
The rate of public burden, as calculated through the ratio of social security payments to national income, is predicted to reach roughly 27% by the year 2025, i.e., when the "graying society" reaches its peak. The burden upon the taxpayers (better rephrased as the public burden) will thus remain under 50%. However, analysis results from the standard case (Case II) as released in "A Blueprint for the 21st Century" (spring 1994) held the ratio to be 30%, and the public burden as 50%. These figures put Japan at the same level as those for Germany in 1990, but is unclear whether these levels are accurate given the rate at which the number of senior citizens is increasing, especially when contrasted to the nations of Scandinavia. Options which lie ahead include freezing the growth in social services and social security, or placing the increased burden upon the individual--both of which would have an impact upon quality of life.
From this perspective, the argument that the taxpayer burden (or the public burden, as mentioned above) should be held at 50% does carry some weight, especially when viewed as a stopgap measure to hold the ever-swelling welfare budget in check, as well as the ensuing inefficiency thereof. However, if this measure is viewed by finance officials as a simple means of shifting the financial burden to individual households, this will become a point of issue.
Social Security Reform and the Role of Labor--Active Participation, Consensus Formation, and Fulfilling Its Societal Responsibility
Although it is common to regard the issue of social security reform as the responsibility of the government, the municipal bodies, and the state, this is not necessarily the case. Rather, the issue is one part of our own existence, be it our day-to-day lives, lifestyles as prorated over a lifetime, family values, workplace, or our method of work. Indeed, social security, as we know it today, should be perceived as an issue which is firmly rooted within society and our places of work, even when including the present system's flaws.
Labor plays a primary role in social security policy-making in most welfare states. Through a variety of methods, the efforts of both labor and of citizens' welfare organizations have come to play an influential part in the formation of policy. In the case of Japan, however, the postwar works of labor have come to take a different form, due to both the novelty of the union concept itself in the days immediately following the war, and to the fact that they did not wield sufficient influence to establish firm policy lines regarding social security and other social systems. This is also attributable to the ongoing confrontation over the shape of politics which followed. In either case, labor failed to play a major role in both the formation of social security policy--in such cases as the Committee on Social Security Systems' policy recommendations of 1950 and 1961--, and in the implementation stage as well. As a consequence, labor has been in the passive position of attempting to prevent social security system decline, rather than attempting to promote reform through accumulated experience.
In addition, although company unions have placed considerable effort into improving retirement payments and welfare benefits on an in-house level, they have failed to place much effort into either the creation or reform of such systems on a society-wide level. A side effect of this has been a sort of backlash, in that the progress unions have made on an individual company level has resulted in a narrowing of focus--i.e., a society based upon individual firms--, which has also led to a decline in the amount of effort spent towards reforms on a society-wide level. This has had the effect of limiting unions to a passive, outsider's role as compared to that of the state and the administration, and they have failed to play a significant part in social security reform.
At present, the basic frameworks of social security for the working class--such as medical care, pensions, and employment insurance--are in the midst of being installed. In addition, 50 years of postwar economic expansion have put Japan in a position to implement the social security network of the 21st century. This poses quite a contrast to the welfare states of the West, who continue to go through adjustment pains.
What is necessary in the construction of this social security network is not just top-down reform on the part of the central government, but also includes simultaneous reform on a variety of fronts: the workplace, on the regional level, and in the household. This process will require the bottom-up accumulation of new regulations and systems--both their planning and the execution thereof.
As this reform effort is fleshed out as a part of management-labor relations, the responsibility of demonstrating the capacities of the network described above--one which provides a shared database linking NPOs, public organizations, and private enterprises, pooling their respective resources--will be placed upon labor, as well as the role of acting as a network for regional society. As long as labor plays this pivotal role in both regional society and in industry--i.e., a medium that provides a social solidarity--, it will also have to play an important role on a national level as well. This responsibility includes playing an active part in policy-making, in the promotion of system reform, as well as providing a sort of pillar for society.
When looking back, it is clear that labor failed to fulfill its potential in the arenas described above, i.e., the role of a policy-maker at the administration level. As defined in the days following the war, a heavy burden was placed on labor to set forth policy for social security, but it also stood to reap the profits of this as well. When looked at in these terms, it is a must that labor increase its involvement in committees on welfare both at the central government level as well as in the municipal bodies, in order to strike a balance with committees on labor-related issues. For labor, this is a part of accepting its responsibility to put its effort into reform of social security, and a part of its duty to strive for a higher quality of life for society as a whole. This is defined in further detail in "The Shape of the Future" (RIALS, 1993) as "a revision of reform efforts in the arena of social systems, and the instigation of a chain reaction--one of cause and effect--to promote a new perspective on the role of social security and social systems." To fulfill this role, labor will also need to be able to flexibly respond to fluctuations within the structure of social security as well.
In the building of a positive relationship--of synergy--between such social systems and the wishes and ideals of the populace, it will first be necessary to break away from the mindset which holds the authority of the state as above that of the people themselves. Rather, what is public, or best in terms of public welfare, is to be defined by the citizens themselves, which will build upon changes already occurring in how public welfare is defined. Labor, given its present influential position within society, is in a position to help do so. By constructing relationships which uphold both independence and solidarity with consumer organizations and volunteer groups, as well as other socially-oriented organizations, the pivotal role labor can fulfill as an instrument for society as a whole can help define the quality of life for Japan in the time to come.
The approaching 21st century has brought a wake-up call: that labor, through tackling the issue of social security straight on, can play a major role in laying the foundation for the Japanese society of the future.