The Japanese Trade Unions' Stance on the Public Pension System

by Jinnosuke Ashida(JTUC-RIALS)

The double task of introducing a new public pension system and reforming the existing system

1998 and 1999 are important years for the future of the public pension system of Japan, partly because 1999 is a year when the finances of public pension are scheduled to be reviewed in the mid-terms. It has been done every five years. And the governmental Finance and Restructuring Council submitted the final report in May 1997. It recommended that benefits of the employees' pension should be reduced as a part of the financial policy to achieve the balanced budget in the mid and long terms. It also suggested policies, as follows;

(1) in the Employees' Pension Insurance, the eligible age for receiving pension benefits should be further raised from 65 years old. (2) the escalator clause of pension benefits should be abolished, and (3) pension benefits should be reduced for recipients in the high income brackets.

It is connected with the estimated future population. It was made public by the government in the spring of 1996. It reported that the birthrate might fall at a faster tempo and that the Japanese society might be further aging.

After the second world war was over, Japan started to introduce social security programs. Now that a law was enacted in December 1997 in order to take care of the aged, we may safely say that Japan has succeeded in catching up with the Western level of social security in no more than forty years. But Japan may become a more aging society than Scandinavian countries in about ten years, while the economy may be matured and damaged from low growth.. Therefore, Japan has the double task of dealing with a problem of the falling birthrate and with the same social security's reform as the countries in the West have carried out since the 1980s.

The development of public pension programs in Japan---either the system of the accumulation of contributions or the levy system

Labor unions of Japan have made efforts to improve social security programs in cooperation with governments and administration. Among other things, the public pension mainly based on the accumulation of contributions started in 1941, but pension benefits had been not large enough for the retired to live on. Workers had to retire early at the age of 55 to 60 for the reason of the retirement age. The retired had to live without the sufficiently guaranteed incomes. Until 1980, the aged family had lived by the then relatively large amounts of retirement allowance and the assistance of their children. It was the 1980s when the working people were aware of the importance of pension benefits as the main source of incomes in the aged family.

In 1973 the national labor centers decided to call a strike in order that a new escalator clause should be inserted in the law of public pension programs, that meant the increase of pension benefits escalating with inflation and higher wages. The government agreed to meet it. Shortly after that, the oil crisis took place and kindled double-digit inflation, when the people more and more trusted in the public pension system. At the same time, the system of the accumulation of contributions was factually replaced with the levy system.

The people put up a weaker resistance to the increase of social security contributions than the increase of tax. This is because of the achievements which the medical, pension and employment social insurance programs have accomplished so far. The trade union movement strongly promoted the introduction of the social insurance program for the aged.

The revision of the public pension system in 1994 and labor unions

The public pension system was substantially revised in 1985 and 1994. In the process of the revisions, the following points were disputed.
(1) In the case of the Employees' Pension Insurance, the eligible age for receiving pension benefits was raised from 60 to 65.
(2) Those of pension recipients who are from 60 to 65 years old and still work for paid jobs receive a small portion of pension benefits. The portion should increase as an incentive to work.
 (3) The practice of providing both benefits of the employment insurance and the employees' pension should be abolished.
(4) Pension contributions are calculated by monthly incomes before the deduction of tax now. That should be replaced by disposable monthly incomes after the deduction of tax and other contributions of social security programs.
(5) And also, pension contributions should be calculated by annual incomes including bonuses, instead of monthly incomes.

Rengo as the national center argues that there is a large gap between the retirement and the pension ages. So, the aged can not live. Rengo insists that both these ages should be same. Also Rengo agrees to the item(2).

 As result, the pension age shall be advanced step by step from 2001 to 2013. Those retired who are from 60 to 65 years old and have no incomes, should continue to receive the portion of pension benefits that is proportionate to the employee's wages.

The 1999 revision and Rengo

There is controversy on the 1999 revision of the Employee's Pension.

The government and administration which conceive a plan of the reduction of pension benefits, put forth a proposal as follows;

(1) the abolishment of the escalator clause, (2) a partial cut of pension benefits for those recipients who are more than 65 years old and in the high income brackets, (3) the level of pension benefits should be reduced from 68% to about 60% of the average monthly incomes. (4) the basic portion of pension benefits is provided in full to those recipients who worked for 40 years. This length of service should extend to 45 years.

On the other hand, the number of the self-employed who are not covered by the Employee's Pension has gone up for recent years. Some of them do not apply for the National Pension. Then, the people are afraid that the public pension system for the whole people might be gradually reduced to a mere form. This must be resolved.

Some economists, employers' organizations and financial institutions are proposing the privatization of the portion of pension benefits that is proportionate with employees' wages, in the form of privately funded corporate pensions, and also the reintroduction of the system of the accumulation of contributions.

Rengo argue as follows;
(1) most important thing is that the employees' pension should continue to provide pension benefits large enough to cover essential living costs of the retired.
(2) so, pension benefits escalating with disposable incomes should be kept. Whenever average take-home wages go up, pension benefits should increase proportionally.
(3) the employees' pension benefits are comprised of the basic portion and wage proportionate portion. This must be kept.
(4) the costs of the employee's pension should continue to be covered by the insured who are working. That is based on the solidarity of generations. The system of the accumulation of contributions is not desirable because it is fragile when inflation and large-scale economic changes take place.　
(5) the employees' pension should cover more part time workers and dispatched workers by the relaxation of qualifications for the insured. For instance, a qualification should be reduced to one half of regular working hours and days, instead of three quarters now.

Rengo's policy on public pension and the construction of sustainable welfare society

Rengo also is afraid of the future of the public pension system. If the aging society continues to be accompanied by the increase of dependents to be supported by the people who are working and the population radically decreases, Japan is not able to keep the existing level of public pension benefits.

A recent survey found that few working people had nostalgia for family values which could replace social security as an 'institutional solidarity'. It also showed that a great number of working men and women wanted to continue working as far as health permits, for not merely economic reasons. So, Japanese who have the highest average life expectancy of any nationality also have the will and ability to work even after they reach the advanced age. Working women in the thirties used to quit their jobs either for giving birth to a child or for nursing children. But they continue working now.

JTUC-RIALS thinks that the strategy of 'jobs for all' is great. For that, we should start in reforming the systems of social security, retirement and retraining, in addition to shorter and more flexible working time.

The 20 century has witnessed the Grand Transformation of Market Economy and international disintegration taking place again and again. The people remember that the world suffered a great deal from rampant inflation in the recent past. Some suggest that the stability of world financial market mechanism takes the top priority. They say that good returns on the pension fund's investment contribute to the long-term stability of living of the working people. We are opposed to the suggestion because it is based on abstract and hypothetical models.

The best choice of the working people is to build working places where they can identify themselves with jobs, and to promote the solidarity of either the same generation or different generations through the public pension system providing the retired with lifetime financial security. It, however, might be supplemented by different corporate and individual pensions. (the end)