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A Reverse-Functioning System: Japan’s Social Security System and Tax Progression in the Early Twenty-First Century

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Worlds of Taxation

Part of the book series: Palgrave Studies in the History of Finance ((PSHF))

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Abstract

This chapter brings attention to the fact that more than simply being dysfunctional, Japan’s tax and social security scheme is ‘reverse-functioning’, in the sense that contrary to solving problems it is supposed to be addressing, the system is actually exacerbating them. Section ‘“A Common Stream” and Abe’s “Basic Policies”’ briefly reviews the history of how governmental agencies have recognized the functions of social security. Section ‘Exclusion and Poverty Effects of Japan’s Social Security System’ describes two major aspects of the reverse-functioning. Firstly, the social insurance system is by its design excluding certain groups. Secondly, income redistribution through tax and social security deepens poverty for many categories. Section ‘Changes in the Tax and Social Security Burden and Level of Progressivity Over Time’ examines the characteristics of Japan’s income redistribution and its progressivity using data from the Organization for Economic Co-operation and Development, which leads to the conclusions in Section ‘Conclusion and Outlook’.

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Notes

  1. 1.

    Osawa, Livelihood Security.

  2. 2.

    This panel was chaired by Taro Miyamoto and vice-chaired by Kohei Komamura. I was an ad hoc member.

  3. 3.

    National Council on Social Security System Reform, Report, 2. Translation of this and the following quotes from Japanese sources by the author.

  4. 4.

    National Council on Social Security System Reform, Report, 7, 9.

  5. 5.

    National Council on Social Security System Reform, Report, 7–8.

  6. 6.

    See Osawa, Social Security, and Osawa, Livelihood Security.

  7. 7.

    National Council on Social Security, Interim Report, 5.

  8. 8.

    National Council on Social Security in 2008 did not use the term ‘1970s model’.

  9. 9.

    Osawa, Social Security, 160–161.

  10. 10.

    Cabinet Decision, Basic Policies 2014, 23.

  11. 11.

    Cabinet Decision, Basic Policies 2014.

  12. 12.

    Cabinet Decision, Basic Policies 2014, 5, 10.

  13. 13.

    In Basic Policies 2014, the term ‘poverty’ appears only in ‘the poverty of children’, and ‘the needy’ appears in the context of strengthening incentives for becoming self-reliant and finding employment (Cabinet Decision, Basic Policies 2014, 9, 26).

  14. 14.

    The basic concept of the livelihood security system was developed in 2005 in Osawa, ‘Japan’s Livelihood Security System in Reverse Functioning.’ The political scientist Taro Miyamoto described welfare politics as ‘politics concerning livelihood security’ (Miyamoto, Welfare Politics, 2–3). The use of the term ‘livelihood security model’ by the National Council on Social Security System Reform seems to reflect Miyamoto’s influence who was one of its members.

  15. 15.

    Osawa, Social Security, 48–49.

  16. 16.

    Osawa, Social Security: 77–78; Osawa, Livelihood Security: 191–192; Ministry of Health, Labor and Welfare. Press Release (Hodo Happyo), 28 February 2017.

  17. 17.

    Osawa, Social Security: 136; Osawa, Livelihood Security: 298.

  18. 18.

    As a result of the revision of the social security system passed in August 2012, social insurance coverage was expanded to part-time workers from October 2016. This was expected to increase coverage by about 250,000 persons.

  19. 19.

    Osawa, Social Security, 151–153; Osawa, Livelihood Security, 312–313.

  20. 20.

    Osawa, Livelihood Security, 193.

  21. 21.

    Osawa, ‘Japan’s Postwar Model of Economic Development has Rendered Japanese Society Vulnerable to Crises and Disasters’, 28–29; Osawa Livelihood Security, 195, 197, 199, 319.

  22. 22.

    Ministry of Health, Labor and Welfare , Press Release, 30 June, 2017; Nihon Keizai Shinbun, 30 June 2017.

  23. 23.

    Osawa, Livelihood Security, 242–243.

  24. 24.

    Osawa, Social Security, 122; Osawa, Livelihood Security, 270–273, 375–378, 380.

  25. 25.

    Esping-Andersen and Myles, ‘Economic Inequality and the Welfare State’, 640.

  26. 26.

    Esping-Andersen, ‘Hybrid or Unique?’, 182.

  27. 27.

    Even though there are issues with its operationalization, I believe that the concept of decommodification itself is valid.

  28. 28.

    OECD.Stat.

  29. 29.

    OECD, Update, 4.

  30. 30.

    Abe, ‘Current State of Poverty and its Factors;’ Osawa, Livelihood Security, 212–214; Abe, Child Poverty 2.

  31. 31.

    OECD, Employment Outlook 2009, Figure 3.9.

  32. 32.

    Komamura et al., ‘The impact of social transfer on relative poverty rates’, 94.

  33. 33.

    The self-employed, unemployed and pensioners are not included; nor does it reflect the situation of employees with short working hours, who are not covered by employees’ social insurance schemes.

  34. 34.

    Average-rate progression is one indicator for measuring the progressivity of certain aspects of the burden; it is also known as structural or local progressivity. There is also effective or global progressivity. Local progressivity is defined according to the following equation with T0 as the tax burden (or tax wedge) for income Y0 and T1 as the tax burden (or tax wedge) for income Y1 (but Y1 > Y0): (T1/Y1–T0/Y0)/(Y1–Y0). If the value is positive, it is progressive, if zero, it is proportional, and if negative, it is regressive (OECD, Taxing Wages 2013, 33).

  35. 35.

    OECD, Employment Outlook 2009, Figure 3.6; OECD, Family Database, CO2.2.

  36. 36.

    OECD, Taxing Wages 2017: 366. Its equivalent disposable income is 1,709,783 yen. According to the 2013 Comprehensive Survey of Living Conditions, the median value for equivalent disposable income (nominal) in 2012 was 2,440,000 yen. Among households with single parents of working age, almost 75 percent had equivalent disposable income of less than 1,700,000 yen (Ministry of Health, Labour and Welfare, Summary Report, 18–19).

  37. 37.

    OECD, Taxing Wages 2010, 320; OECD, Taxing Wages 2011, 374.

  38. 38.

    See Akemi Kita for a detailed comparison of the current and previous child allowances (Kita, ‘The child allowance system and gender as the focal point for social policy’).

  39. 39.

    OECD, Taxing Wages 2012, 370; OECD Taxing Wages 2013, 370; OECD Taxing Wages 2014, 366.

  40. 40.

    OECD, Taxing Wages 2013, Special Feature; OECD Taxing Wages 2014, Special Feature.

  41. 41.

    OECD, Taxing Wages 2017, Part III.

  42. 42.

    See Fumihiko Yamada, ‘Child Allowance: From a Journalist’s Perspective’.

  43. 43.

    Ministry of Health , Labor and Welfare, Summary Report, 17.

  44. 44.

    Based on the GDP Statistics of the Cabinet Office of Japan at http://www.esri.cao.go.jp/en/sna/data/sokuhou/files/2018/qe181/gdemenuea.html. Accessed on June 3, 2018.

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Authors and Affiliations

  1. Institute of Social Science, University of Tokyo, Tokyo, Japan

    Mari Osawa

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  1. Mari Osawa
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Correspondence to Mari Osawa .

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Editors and Affiliations

  1. ETH Zurich Institute of History, Zürich, Switzerland

    Gisela Huerlimann

  2. University of California, Santa Barbara, Santa Barbara, CA, USA

    W. Elliot Brownlee

  3. Keio University, Tokyo, Japan

    Eisaku Ide

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Osawa, M. (2018). A Reverse-Functioning System: Japan’s Social Security System and Tax Progression in the Early Twenty-First Century. In: Huerlimann, G., Brownlee, W., Ide, E. (eds) Worlds of Taxation. Palgrave Studies in the History of Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-90263-0_10

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