Gender and Pension Reforms in Japan
Kikuka Kobatake
PhD candidate
Department of Social Policy
The London School of Economics and Political Science
k.kobatake@lse.ac.uk
East Asian Social Policy research network (EASP) Second conference
Pressure, Policy-Making and Policy Outcome
- Understanding East Asian Welfare Reforms
Abstract
It is well documented that women’s lower levels of pensions are the result of both
women’s disadvantages in the labour market and male-oriented pension systems.
Being often a main carer, many women compromise their position in the labour market
in order to fulfill their care responsibilities. In the case of Japan, the ideology of
maternal care is combined, though weakening, with the ‘ie’ ideology, which encourages
women to take up the role as main carer for their in-laws. There also exists persistent
gender discrimination in the labour market, suppressing women’s gains as wage earners.
These disadvantages as wage earners are reproduced or sometimes magnified through
pension systems which are based on men’s working experiences.
To mitigate the resultant gender gap in pensions, many welfare states, including
Japan,
have
constructed
pension
systems
which
are
based
on
male-breadwinner/housewife model and treat women as dependants of their husband
rather than as workers in their own right. Nonetheless, the considerable increase in the
female labour force in the last couple of decades as well as gender equality movements
started putting this arrangement in question. Consequently, the dominant gender
model in the state pension systems started changing around the 1990s.
Using the conceptual framework of eligibility criteria to benefits elaborated in
Sainsbury (1996), this paper examines the changes and continuities of the dominant
gender model manifested in recent pension reforms in Japan, and considers their
implications for women’s economic welfare in old age.
In social insurance systems, people gain an entitlement to benefits on a basis of their
monetary contributions. Nonetheless, most public insurance schemes have two other
bases of entitlement to benefits, and many women receive pensions through these routes
(Sainsbury 1996). The first alternative basis is as wives, which grants benefits on the
basis of women’s economic dependency on their husband. The other route to pensions
is as mothers or carers, treating care as another form of contribution. In pension
systems, this latter access to old age pensions is rather new development, but by the end
of 1990s, women in many countries accumulate individual pension entitlements through
1
informal care work for their children or other family members. These three bases may
overlap, and certain benefits are available, for example, only to wives in employment or
married mothers (see Figure 1). Moreover, these three entitlements may have
conflicting interests with each other, operating as a divisive factor for women as a group.
Japanese pension insurance is the case in point for this aspect of differential
entitlements for women. There have been heated debates that the public pension
system treats housewives of the insured employees unfairly favourably than women
with other marital and/or employment status. While this line of arguments is not
unique to Japan, the extent to which it has influenced political debates on women’s
pensions is distinctive. Indeed, the criticism was such that at the turn of the
millennium, the government formed a special committee which specifically discussed
on women’s pensions (Josei no Lifestyle no Henka nadoni Taioushita Nenkin no Arikata
ni Kansuru Kentoukai).
This paper places the 2004 pension reform in this context, and examines the
reform from the viewpoint of women’s economic welfare in old age. First, the
historical development of women’s coverage and debates of the time will be looked at
in order to put the current system and ‘women’s pension problem’ in the context. This
will be followed by the examination of the gap between the gender model in the pension
system and women’s changing life courses. Then, I will look at how the reforms since
the 1990s responded to these tensions, and point out the limitations of the reform.
Lastly, I will consider the way forward.
Figure 1
Bases of entitlement for women
Wife
Wage earner
Mother/ carer
2
Historical development of women’s pensions1
In Japan, the first public pension scheme for workers was established in 1941. Since
then, the coverage was extended and the level of benefits was increased. Like in many
countries, however, women’s pensions developed in a different way from men. Unlike
men, women were included in public pensions as dependants first and foremost, rather
than as contributors. Indeed, Japanese women as workers were totally excluded from
the first public pension scheme for workers. In 1944, this scheme was transformed
into Employee’s Pension Insurance (EPI), and its coverage was extended to women as
workers. Nonetheless, it was assumed that most women would leave the labour
market on marriage or childbearing, and that they would be provided for by their
husband in their old age. Because of this assumption, the main issue brought up as
women’s pension problem in the early history of Japanese public pensions was
regarding the adequacy of dependency additions for wives and widow’s benefits rather
than the issues surrounding women’s own pensions (Fujii 1993). Indeed, in contrast to
women’s pensions as wage earners, pensions as wives were included since the inception
of public pensions in the form of widow’s pensions, and provision for wives had been
repeatedly improved in the course of pension history as dependant allowance for male
breadwinners and as widow’s pensions.
While EPI was strengthening its nature as a provision for male breadwinners, the
flat-rate National Pension Insurance (NPI) was established in 1961 as individually based
provision for all people who were not previously covered by public pension system.
This included economically inactive wives. Since NPI was decided not to provide
dependant allowance, non-employed spouses of the farmers and the self-employed were
required to make mandatory contributions to NPI on their own behalf 2 . This
arrangement raised questions about housewives of insured employees. There were two
strong opinions at the time; one was to exclude housewives from NPI completely on the
ground that they would be provided by their husband, and the other was to make
housewife’s membership compulsory in line with wives of the self-employed and
farmers (Lewis 1981). Concerns were also expressed about ‘women’s pension
problem’ of the loss of entitlements through divorce. However, the issue was settled as
housewife’s voluntary membership. Here, the seed of contention between housewives
of insured employees and other women was planted. Nonetheless, the dominant
debate on fairness at the time was about the benefit gap between households rather than
individuals. While it was argued that housewives’ participation in the pension scheme
would rectify the benefit gap between two-earner employee households and one-earner
employee households, the new arrangement now created the gap between households
which took out voluntary pensions for housewives and those which did not. Moreover,
dependent spouses of insured employees still could be left without any pensions on
divorce if they did not make voluntary contribution to NPI.
1
In this article, I focus on schemes for employees in the private sector and the self-employed. For
employees in the public sector, there are separate schemes, which operate similar to those for private
sector employees in the main.
2
The NPI legislation mandated that the heads of the farming or self-employed household pay
contributions both for themselves and their spouse if he/ she was not covered by other public pension
schemes.
3
In 1985, a major reform was introduced to transform the system into a current
form (see Figure 2). The reform has changed NPI into the flat-rate Basic Pension (BP),
which covers all the population in principle, who are aged 20 and over. On top of this
basic tier, employees have earnings-related state pensions through EPI. Since this
reform, the participation of dependent spouses of insured employees has become
mandatory, and they are covered by BP. As the result, all women officially have their
own individual pensions regardless of their marital and employment status, solving the
pension problem of divorced women. This arrangement also rectified inequality in
benefit level between households where housewives took out the voluntary coverage
and those where they did not. Nonetheless, this new development for women’s
individual pension right did not originate from a gender equality framework. Rather,
women’s individual pension right was sought through the traditional assumption of their
economic dependency. Moreover, the distinction between wives of employees and the
self-employed was retained, making the contribution from the former exempted while
that from the latter remained compulsory. This arrangement became a source of
debates about favourable treatment of housewives of the insured employees since then.
Notwithstanding the positive aspect of this reform in terms of women’s individual
pension right, this arrangement in a way consolidated the division among women.
Figure 2: The structure of pension system
Before the 1985 Reform
After the 1985 Reform
Employee’s
Pension
Insurance
Employee’s
Pension
Insurance
National
Pension
Insurance
Basic Pension
Many criticisms of the reformed arrangement are focused on the non-contribution of
4
housewives of the insured employees while they can receive BP at full rate (Hori 1996).
The main points can be summarised as follows:
1. Unfairness among households with different working patterns: Male
breadwinner/housewife households receive two units of basic pensions in exchange
for one unit of contribution. This is unfair for other types of households because
they in effect support the first type of households out of their contributions.
2. Unfairness among economically inactive women: The above mentioned
housewife’s entitlement to Basic Pensions is not equally available to all women, but
it depends on their husband’s status in the labour market. Thus, wives of the
unemployed, wives of the self-employed or single women should pay the premiums
to Basic Pensions on their own behalf regardless of their own labour market status
unless household incomes are below the threshold for exemption.
3. Unfairness among economically active women: Wives of the insured
employees can benefit from the above derived rights as long as they work part-time
and their working hours and income are under certain limit (75% of regular workers
and 1.3 million yen respectively). On the other hand, even if these ceilings are
exceeded, part-time workers are not necessarily guaranteed the coverage to EPI.
Thus, part-time workers who work beyond the limit but are not covered by EPI have
to pay flat-rate contributions for the same benefits as those granted to housewives.
4. Unfairness as widows: The dual entitlements as wives and wage earners do not
lead to additional benefit for survivors. In widowhood, wives with employment
record had to choose between their own EPI pensions and widow’s pensions (75%
of their husband’s EPI pensions) to top up their own basic pensions. Due to
generally low level of women’s EPI pensions, most women would find widow’s
benefits higher than their own EPI, thus, give up their own pensions in order to
receive widow’s pensions. This means that women who have contributed to the
pension scheme would get the same amount of pensions with housewives who have
not paid in, if their late husband’s salaries are at the same level. Moreover,
women’s entitlement as wage earners offers lower benefits than that for men.
When an economically active wife dies, her husband cannot receive survivor’s
benefits even if he is economically dependent on his late wife unless he is aged 55
or over.
5. Negative effects for gender equality and for the pension system: These
‘favourable’ treatments of housewives operated as disincentives for women to seek
for their own pensions as wage earners, strengthening the gender division of labour,
help curtailing women’s position in the labour market, and worsening the finance of
the pension system.
These criticisms are partly the result of recent general trends towards individualization
of benefits, while the Japanese pension system has developed on the basis of households
as a unit. Indeed, the government defends the current arrangement by pointing out the
equality in both contributions and benefits between households if the aggregate earnings
5
are the same.
Widening gap between model and reality
With the increase in women’s economic responsibilities as wage earners, as well as
gender equality movements, it has become increasingly difficult to sustain the
assumptions in the pension system that married women are economically dependent on
their husband. Against this background, demands for some amendments for women’s
entitlement as wage earners are increasingly gaining ground. On the other hand, due to
the broad definition of housewives in the pension system, a significant number of
women who work part-time are covered as wives rather than as wage earners despite
their link with the labour market. In 2002, 41% of employed women worked part-time,
and about 1.2 million people were covered as dependent spouses of insured employees.
With the prospect of further increase in the part-time and other atypical working
patterns, the need to reconsider the coverage of non-regular workers, including those
who are covered as dependent spouses, is generally acknowledged. The inclusion of
part-time workers into the system as wage earners is also expected to ease the tension
between women as wives and women as wage earners. Nonetheless, the 2004 reform
decided to postpone the coverage of part-time workers as wage earners rather than as
wives.
In contrast to the general acknowledgement of the need to improve the
entitlement of women as wage earners, proposals to curtail the existing entitlement as
wives are strongly resisted. Especially housewives’ entitlement to BP without
contribution turns out to be contentious. One of the arguments to defend the
arrangement is that it is a necessary redistribution. It is held that the principle of
public pension insurance is ‘contribution according to one’s ability to contribute’; thus it
would be against this principle as well as not realistic to collect premiums from
housewives who have no earnings of their own. The difficulties for women to
accumulate their own pensions as individuals due to responsibilities for unpaid work are
also cited as the rationale for retaining the arrangement. Regarding the unfairness
among economically inactive women, the proponents often defend it citing the
difficulties of knowing the incomes of non-employee households as well as those of
individuals in such households.
Policy development in the 1990s and beyond
Policy developments in the 1990s reflected these arguments and they can be summed up
as the attempts to ease the tension between women as housewives and women as wage
earners, without curtailing the entitlement of the former. In response to the criticism
regarding the unfairness as widows (the point No. 4 above), in 1994, the calculation of
widow’s pensions was modified so that women’s own monetary contribution can be
reflected to a certain extent in the overall pension amount. In addition to the existing
two options, widows were enabled to choose the third option, that is, half of late
husband’s pensions and half of one’s own.
Thus, the balance between
male-breadwinner/housewife model and two breadwinner model was rectified to a
certain extent. Another new move in pension reforms in the 1990s was to strengthen
employed parents’ rights to pensions. In 1994, care credits were introduced for
employees on maternity and parental leave, which was subsequently improved in 1999.
6
This arrangement is more in line with income maintenance, granting credits in order to
compensate for the lost or lowered incomes due to care work. Thus, those who are
outside the labour market are excluded. Moreover, only insured employees are eligible
for these credits; others such as the self-employed and part-time workers are excluded
from this development. Moreover, while these credits are a significant step forward
for those with care responsibilities, this move is more to do with the concerns about the
low fertility rate rather than with the recognition of care value per se. Thus, there was
no credit introduced for care for frail elderly or disabled people.
The reform in 2004 followed the basic path taken in the 1990s, that is, to try to
strike a fine balance between the entitlements as wives and as wage earners without
harming the vested interest of the former, and without expanding the definition of the
latter. Under the banner of ‘supporting parents to raise the next generations’, the
reform legislated to extend the maximum period of care credits from one year to three
years. In addition, measures were introduced for those who combine employment and
childcare; it legislated to use previous earnings for pension calculation purposes if an
employee’s earning should decline due to shorter working hours for child-rearing. In
response to the criticism regarding survivor’s benefits for women with employment
record, the reform legislated that widows should receive their own earnings-related part
which would be topped up by the difference between their own pension and the level
they would have received before the reform. As a result, while the nominal
composition of survivor’s benefits has changed, the final amount of survivor’s benefit
remains the same with that before the reform. Although the reform also introduced a
minor cut in wives’ entitlement for young widows3, this would affect only a small
minority of women. It can be said that the 2004 reform strengthened the entitlement as
wage earners but only marginally, while it left the entitlement as wives almost intact.
Indeed, the entitlement as wives not only proved to be resilient against the erosion, but
also in a way further strengthened in the 2004 reform. The government reiterated the
legitimacy of entitlement to BP as wives as the official basic understanding.
Furthermore, in response to the concerns about the low level of benefits for divorcees,
the reform introduced pension splitting upon divorce. As the result, dependent spouses
can claim the entitlement to the former partner’s earnings-related part of benefits upon
divorce, further consolidating the entitlement as wives to individual benefit through
derived rights.
The way forward
Overall, the Japanese pension system retains the bias for the entitlement as wives
despite the extensive discussions and a series of reforms (see Figure 3). Although
additional provisions were introduced for wage earners since the 1990s, the focus of
many criticisms, that is, the entitlement to BP as wives or derived rights saw little
change during the period. Thus, it is more likely that the criticisms about unfair
treatment of housewives and their counterarguments will persist.
Figure 3 Bases of Entitlement for women and corresponding benefits after the 2004
3
The reform limited the duration of benefit provision from EPI to 5 years for childless widows aged 30
or below.
7
reform
Wife
BP
Widow’s
pension:
75%
of
+ Widow’s
husband’s EPI
pension: 50%
- Survivor’s benefit limited to 5
of husband’s
years for childless widows aged
EPI and 50%
under 30
of own EPI
+ Half of husband’s EPI for
Wage earner
BP
EPI
+ credits during
divorcee
parental leave for BP+EPI
+ maintained wage level for EPI
Mother/ carer
calculation during childcare
period
One proposed way to break this impasse is to cover married part-time workers as wage
earners. As mentioned above, although the implementation was postponed, the law
legislated that the necessary step should be considered in the next 5 years. However,
this measure will still leave women who do not contribute, and they are more likely to
be from better off households than those who are covered as part-time workers.
The better way forward, therefore, is to reconsider the meaning of contribution.
In exchange for the benefits, people are required to make monetary contribution. This
leads to the entitlement as wage earners. However, there is another way to support the
system i.e. bearing and raising the next generation who support the system, which may
lead to the entitlement as carers. Indeed, without this contribution, the system cannot
be sustainable. Moreover, if one looks beyond the pension system but wider social
security system, it is impossible not to acknowledge the role informal care work plays to
contain social expenditure. In that case, is it not possible to consider care work as
contributions? Indeed, some countries such as Germany have introduced this kind of
arrangement and give credits to both parents and carers regardless of their marital status.
In Japan, one of the often used arguments to defend the entitlement as wives is that
housewives are playing a valuable role as informal carers, and many women withdraw
from the labour market to take up the role. However, covering housewives on the
basis of their care work has a flaw of identifying housewives with carers. In many
cases, if not most of the cases, these two groups may overlap. But in some cases, they
do not. And the popular image of housewives which has caused a series of
antagonistic debates is not the former who devote themselves to the care for others, but
8
the latter who enjoy life at others’ cost. Therefore, it would be better to make a
distinction between the two, and include carers as contributors in their own rights rather
than covering them as dependants. Although there is a danger of consolidating the
traditional gender division of labour in this model, the strengthening of women’s
pension entitlement as contributors seems to be more desirable than extending the
entitlement based on dependency to carers.
Nonetheless, although it is important to distinguish between dependency and
contribution, there needs to consider women’s pensions from a viewpoint of decent
level of benefits. It is well documented that women’s pension level is generally lower
than that of men’s, and older women are disproportionately represented in the lower
income groups (see OECD(2001), for example). It should also be noted that the
entitlement to basic pensions as wives boosts benefit levels for many women.
Moreover, consideration should be given to those who cannot ‘contribute’ due to ill
health or other reasons. Thus, rather than aiming for an equilibrium between monetary
contributions and benefit levels at a low level, the focus should be set on enhancing the
general level of women’s pensions. Especially, if BP is for supporting the basic means
for living in old age, as it is often mentioned, it should be guaranteed ideally to all,
including housewives. The contribution principle, which includes care as contribution,
can be then applied to the top-up benefits i.e. EPI in the case of Japanese system.
The demand for Basic Pension for all financed by general revenue has a
long-history and been repeatedly proposed.
Nonetheless, the government has
explicitly showed its preference for social insurance systems based on contributions,
and the actual measures taken were focused more on the fairness in contribution duties
between women with different life courses. However, as long as the system sticks to
the narrow definition of contribution, most women as contributors would fair worse
than men in old age. While BP should be the key tool for rectifying this situation, its
mixed principle of base unit (household and individual) together with narrow definition
of contribution has turned BP to be a divisive factor rather than cohesive for women.
Conclusion
Women’s pensions pose problems in many countries. However, what dimension of
women’s pensions is considered to be problematic varies across countries. In Japan,
the often vocally expressed issue has been fairness among women. Moreover, rather
than questioning the inequality or decency of individuals’ absolute benefit levels, the
focus is often on the contribution. Thus, the popular debates of ‘women’s pension
problem’ tend to be reduced to the criticisms of housewives’ free-riding, splitting
women into housewives and non-housewives, rather than demanding for better pensions
for women as a group.
One of the proposed solutions for this antagonism is to reduce the number of
‘housewives’ by extending the coverage of EPI to part-time workers. In a series of
committee discussions, the need to cover part-time workers into EPI was repeatedly
acknowledged not only due to women’s problems but also against the backdrop of
increasing flexibility of labour. Thus, although the actual implementation was again
postponed, the 2004 reform clearly legislated that necessary steps should be taken in the
next five years. On the other hand, another possible way forward was not taken up,
that is, care as contribution. Although care credits were introduced, they were in the
context of ‘supporting employees with family responsibilities’ against the backdrop of
9
lowering fertility rate. Thus, these credits are only for insured employees and limited
to parents.
In the debates on fairness in the pension system, the focus has been put on the
link between monetary contribution and entitlement. Indeed, under social insurance
systems, fairness with regard to contribution and benefits turns out to be a recurrent
topic, be it between individuals, households, or generations. However, in these debates,
contribution tends to be defined narrowly to the disadvantage for women as a group.
Moreover, ‘fairness’ in the proportion between contributions and benefits does not
necessarily promise fairness in the resource distribution between different social groups.
Thus, in order to reconstruct a pension system which better accommodates women, both
the meaning of contribution and fairness in the benefit level should be reconsidered.
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