Abstract
French economist Thomas Piketty’s best-selling book has raised awareness of inequality. In Japan, income inequality has been increasing since the mid-1980s. Since the later 1980s, people face urban–rural disparities during the period of rapid economic growth, a wealth gap between haves and have-nots during the economic bubble, and the adverse effects of structural reforms were implemented by the Koizumi administration. The biggest factor in widening income inequality among the working-age population is the expanding low-income class due to increasing temporary employment. With companies focused on cutting costs, more temporary workers are hired given their relatively lower wage levels. Increasing numbers of the elderly with a wide income gap and no-employed people are also contributing to widening inequality. Middle-class income levels are decreasing, raising the risk of slipping into poverty. Japan's relative poverty rates rose since the 1980s, that is, from 12.0% in 1985 over 16% in 2000s. The percentage of households on welfare percentage of public assistance recipients has grown in single-mother households and the other households. One in six children live at less than half average living standard. The poverty rate of children in single-mother households is over 50%, the highest among OECD in 2010.
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Notes
- 1.
The model used in this chapter is from Uemura (2015b), who analyzed public pension deductions.
- 2.
According to the Ministry of Internal Affairs and Communications’ “Family Income and Expenditure Survey Report in the 2013,” among worker households with two or more people “annual income” is 4.59 million yen for people aged under 30 years, 5.89 million yen for people in their 30s, and 6.33 million yen for people in their 40s.
- 3.
For reforms to the tax system and the social security system , I referred to Financial Statistics: Tax Edition by the Policy Research Institute of the Ministry of Finance, Japan. A tax reduction on the fixed rate of income tax was also considered.
- 4.
In this chapter, the data were broken down into five income group quantiles and into generation groups (based on the age of the head of household).
- 5.
There were two types of anonymous data in the Ministry of Internal Affairs and Communications’ “National Survey of Family Income and Expenditure” (2004): on “single-person households” and “households with two or more people.” In this chapter, data on households with two or more people are used. The dataset used for analysis in this chapter was created and processed independently based on the statistical method of, and anonymous date received from, the National Statistics Center.
- 6.
Data on the nominal wage growth rates in the past and future were acquired from the 2009 Ministry of Health, Labour and Welfare, “Financial Inspection-Related Data” and its 2012 “5th Special Subcommittee of Social Security Council Pension Committee on the Economic Assumptions and the Approaches for Fund Management for Pension Finances, Material 3-3.”
- 7.
According to the Ministry of Health, Labour and Welfare’s (2004) “Overview of Simplified Life Expectancy Table 2. Trends in the Average Life Expectancy,” the average life expectancy of men is 78.64 years and that of women is 85.59 years.
- 8.
Income tax and resident tax were included in the system from 1958 onward with reference to the Ministry of Finance’s “Government Finances and Financial Statistics Monthly Report: Special Tax Edition,” and the Office of Financial History, Ministry of Finance (1977, 1990). A declining fixed rate tax was also considered, while the standard tax rate was adopted for resident tax, which is taxed on the previous year’s income.
- 9.
According to the Ministry of Health, Labour and Welfare’s (2004) “Population Dynamics Statistics,” the average marriage age is 29.6 years for men and 27.8 years for women. Also, from the “Statistics on Births” from the Ministry of Health, Labour and Welfare (2010), “the average period from the average age of the first marriage of the wife until the average age at the time of the first birth: Showa 50 to Heisei 21,” the average maternal age at the time of the first child’s birth was 28.9 years, and 30.9 years at the time of the second child’s birth.
- 10.
For the simplified method of calculating insurance contributions , please refer to the Ministry of Finance, Policy Research Institute, Government Finances and Financial Statistics Monthly Report: Special Tax Edition.
- 11.
Insured persons must pay contributions every month. Those months are recognized as insured periods. National Pension is operated under the principle of “fixed contribution” and “fixed benefit”. Yet, in order to ensure the financial balance in the future, contribution of National Pension is regularly revised at least once every 5 years. The value of the monthly amount of insurance contributions differed for people aged less than 35 years and aged 35 years and above from April 1961 to June 1960, so the same applies in this chapter.
- 12.
- 13.
The estimations were made by only extracting information on the targets of the analysis. For example, in the case of spousal deduction , only information on households eligible for such a deduction were extracted.
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Adachi, Y. (2018). Redistribution Effects of Income Taxation and Insurance Contributions. In: The Economics of Tax and Social Security in Japan. Springer, Singapore. https://doi.org/10.1007/978-981-10-7176-8_2
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DOI: https://doi.org/10.1007/978-981-10-7176-8_2
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