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Oishi A.S.
Indicators of social quality in Japan1
Introduction. The purpose of this paper is to present a set of indicators to establish the empirical basis of the concept of social quality of Japan. Social quality is defined as the extent to which citizens are able to participate in the social and economic life of their communities under conditions which enhance their well-being and individual potential (Beck et al. 2001: 6). Social quality contains four conditional factors, i.e., socio-economic security, social integration, social cohesion and empowerment (Beck et al. 1997, 2001).
When we discuss social quality of Japan, it is important to keep in mind the three challenges facing Japan, because they affect people’s values, institutions, and policies.
The first challenge is a rapid population aging. The number of population aged 65 or older was 25.8 million in 2005, accounting for 20.2 percent of the total population. Looking forward, the share of the elderly is projected to rise as high as 40.5 percent in 2055 (Figure 1) (NIPSSR 2006a). Along with the aging population, Japan’s population reached a peak at 127.78 million in 2004, and began decreasing thereafter. Recent forecast by the National Institute of Population and Social Security Research (NIPSSR) predicts the total population of Japan will be 89.93 million in 2055, a 30 percent decrease from 2005. The number of working-age population (aged 15-64) has also started to decline since its peak at 87 million in 1995, and is expected to be 46 million in 2055. These demographic changes will inevitably bring about a decrease in the labor force. According to an estimate by the Ministry of Health, Labour and Welfare (MHLW), Japan's labor force is projected to decline by 10 million in the next 25 years, given the prevailing pattern of labor force participation rates by age and gender. Thus, there is a concern that a diminished labor force would lead to a lower economic growth.
The second challenge is the sustainability of social security system. Since Japan's social security program is basically a pay-as-you-go system, the government must reduce benefits and/or increase contributions in order to keep the programs financially sustainable through the coming decades of rapid population aging. Social security expenditures including public pensions, healthcare, and social welfare benefits amounted to 85.6 trillion yen in 2004, equivalent to 23.7 percent of national income (NIPSSR 2006b). The latest official projection, released by the MHLW in 2006, expects social security expenditures to grow to a level of 26.1 percent of national income by 2025, assuming the FY 2004 reform is expected to keep pension payments constant at around 9 percent of GDP through the end of the decade by allowing the replacement rate to fall from 59 percent to 50 percent. Many analysts, however, criticize that the MHLW's projection is too optimistic because it assumes higher fertility and higher wage growth.
The third challenge for Japan is the growing inequality. The Gini coefficient of household size-adjusted income (post-tax, post-transfer) has risen significantly since the mid-1980s from 0.310 in 1986 to 0.351 in 2001 (Oishi 2006) (Figure 2). Among OECD member countries, Japan follows the United States, the United Kingdom, and Spain in terms of income inequality (Oshio 2006). It is a common understanding among Japanese researchers that the rise in the inequality measures can be partly attributed to population aging. For example, Ohtake and Saito (1998) stress that demographic change is responsible for about a half of the increase in the inequality measure in the 1980s and early 1990s. On the other hand, recent studies reveal a rising inequality among younger generations, especially among people in their 30s and 40s (Oshio 2006; Oishi 2006). Poverty has also become prevalent among children.
1 The data used in this paper were made available to the author by the Ministry of Health, Labour and Welfare of Japan: notice number 0822005 dated August 22, 2005.
The proportion of children in relative poverty rose from 10 percent in 1990 to 14 percent in 2001, which is well above the OECD average (Abe 2005a). The incidence of poverty is more significant among single parent households; more than 60 percent of single mothers were in relative poverty in 2001 even though 86 percent of them were employed (Abe and Oishi 2005; Abe 2005a). Despite the increased needs for social protection, it is a difficult task to expand generosity of social programs because the government is undergoing reforms to achieve fiscal consolidation with gross public debt now above 170 percent of GDP.
The remainder of this paper is constructed as follows. Section 1 considers socioeconomic security from the viewpoint of inequality. Section 2 examines social cohesion with special reference to people’s perceptions on causes of poverty. Section 3 introduces the results of recent pioneering study on the measurement of social inclusion in Japan. Section 4 examines social empowerment in relation to the female labor in Japan.
Socio-Economic Security. Socio-economic security consists of four domains: financial resources, housing and the environment, health and care, work and education. Although this section focuses on the indicators related to the two domains of «financial resources» and «work», most of the other quantitative indicators comprise socio-economic security can be easily obtained in the government statistics and other resources.
The widening of income gap among households in Japan has much to do with the changes in the labor market. First, the proportion of non-regular workers2 doubled since the mid-1980s (from 16.4 percent in 1985 to 33.0 percent in 2006) (Figure 3). The number of non-regular workers stood at 16.77 million in 2006 and 69 percent of them (11.59 million) were females. The average non-regular worker earns less than 3 million yen annually, which is almost a half of those of the average regular worker. Among non-regular workers, female part-timers (most of them are married) tend to earn less, with their hourly wage rate below 50 percent of that of male regular workers3. There are not only differences in wages but also social protections between non-regular and regular workers. For instance, a large proportion of the non-regular workers are not entitled to parental and family-care leaves. According to a
survey of MHLW4 in 2006, only 13.4 percent of new mothers who have worked as nonregular employees before the birth of their first child said that they were entitled to parental-leave, whereas the corresponding figure for new mothers who have worked as regular employees is 79.6 percent. Moreover, about 20 percent of non-regular workers are not covered by public pension scheme (MHLW, White Paper on Labour 2006).
Second, the economic stagnation in the 1990s and the dualism in the labor market affected the most vulnerable, economically disadvantaged. Because a number of firms reduced new recruitment of full-time workers during the recession, youth unemployment rate5 rose from 4.3 percent in 1990 to as high as 10.1 percent in 2003. Out of 4.4 million employees (excluding those who attending school while working) aged 15-24 in 2005, 2.4 million (56.1 percent) were non-regular workers. The number of so-called «NEET» (people who are not in education, employment or training) aged 15-34 increased from 400 thousand in 1993 to 640 thousand in 2005.
It is noteworthy that the employment rate of Japanese single mothers6 is remarkably high from an international perspective (Tokoro 2003). Although the employment rate declined
2 “Non-regular employees” here includes (a) part-time workers who work less than 35 hours a week, (b) dispatched workers from temporary labor agencies and (c) contract employees and entrusted employees (Source: Labor Force Survey, Statistics Bureau, Ministry of Internal Affairs and Communications).
3 If we include “bonuses” (monetary payments usually paid biannually to regular employees), the hourly wage gap widens to 70 percent.
4 Panel Survey of Adolescents in the 21st Century: Wave four, MHLW 2006.
5 “Youth” here refers to people aged 15-24.
6 The MHLW’s definition of “single mother household” is “a household without a father where the mother is raising the child (under 20 years of age and unmarried),” and includes those cases where the mother and child is
from 88.6 percent in 1993 to 83.3 percent in 2003, it far exceeds the level of the USA, the UK, France and other major OECD countries. Still, single mothers in these days face limited opportunity for regular employment. In 1993, 46.3 percent of single mothers had regular jobs. The ratio dropped to 32.5 percent in 2003 and conversely, more than half of single mothers were employed on non-regular basis (MHLW, White Paper on Single Mother Households). As a result, the median earnings of single mothers decreased in real terms (in 2000 prices) from 2.05 million yen in 1993 to 1.70 million yen in 2001 (Abe and Oishi 2005).
Third, the real earnings of male household heads also declined in the 1990s, although the impact of economic stagnation differs by generations. As it can be seen in Figure 4, the entire earnings distribution of married men in their 30s and 40s moved rightward between 1987 and 1993 when the economy enjoyed the so-called «bubble boom,» but this trend reversed itself during the 1990s with the majority spilling toward the lower tail of the distribution. On the other hand, the entire income distribution of married men in their 50s moved to the right in both periods. Thus, male earnings have become more dispersed within and across generations (Abe and Oishi 2007).
Turning to the institutional settings to cope with poverty, Public Assistance (PA) is the major in-cash benefit available to households with income below the minimum standard of living. The calculation of the minimum standard of living depends on a number of factors including household size, ages of household members, and location of residence. In 2005, 1.48 million people in 1.04 million households received the PA. The coverage ratio has hit the lowest at 0.7 percent in 1995 and reached to 1.15 percent in 2005, but still extremely low by international standards. Uzuhashi (1999) notes that the Japan’s ratio of PA expenditures to GDP in the late 1990s was lowest among the OECD countries. Abe (2003) attributes the low coverage to «strict means and asset testing, strict application of «self-help» principle, inaccessibility of welfare offices, stigma that deters people from applying7».
There are a number of other in-cash benefits that are more specifically targeted, such as the Child Rearing Allowance (CRA) for a single mother rearing children below 18 years of age and whose income is below a certain threshold. The full benefit is 41 thousand yen per month (0.5 million yen a year) for one child. Additional benefit for the second child is 5 thousand yen per month, and for the third and subsequent children, 3 thousand yen each per month. The income threshold for the full benefit is yearly earnings of 1.3 million yen, and for those with earnings between 1.3 million yen to 3.65 million yen, the amount is reduced gradually (in the case of two person household with a mother and child). Those with earnings above 3.65 million yen are not eligible to receive the CRA (Figure 5). The mother’s income after deductions is compared to the threshold to determine the eligibility. As of January 2006, there are 962 thousand beneficiaries of CRA in Japan (a 64 percent increase from 1990) out of which 595 thousand (62 percent) of them qualify for receiving full benefits.
Faced with the rapid increase in the number of PA and CRA recipients, the Japanese government adopted several measures to reduce these expenditures. First, additional benefit to the elderly receiving PA was abolished in 2006. Second, starting in 2005, additional benefit to single mothers receiving PA was abolished for mothers with children aged 16-188. Third, starting in April 2008, the time limit of five years will be introduced to the provision of CRA
living with their relative(s). In Japan, about one-third of lone mothers live with their parents, siblings or other relatives.
7 Generally, assets such as housing and land must be sold before qualifying PA. Unemployed young people who has a will and ability to work, is unlikely to get PA. In addition, applicants for PA are required to ask for financial support of close relatives, independent parents or adult children by the Civil Law.
8 The additional benefit scheme was kept unchanged for PA recipient mothers with children below 16 years of age. In November 2006, however, the Finance Council recommended complete abolishment of the additional benefit.
and the amount of benefit will be reduced after their fifth year9. Forth, special training programs for CRA and PA recipients below the age of 65 was introduced in 2005 to promote self-sufficiency. Fifth, the government decided to partially transfer the financial burden of PA and CRA to local governments. Overall, due to the government’s policy to put fiscal consolidation above redistribution, socio-economic security for low income households seems to have been weakened in these years. As we will see in the next section, this government’s attitude toward redistribution reflects the peoples’ beliefs on causes of poverty.
Social Cohesion. Social cohesion consists of four domains: trust, other integrative norms and values, social networks and identity. In this section I will focus on the two indicators which seem to characterize Japan’s social cohesion.
One of such indicators is «beliefs on causes of poverty10». According to the 1995 wave of the World Values Survey, the share of respondents believing that "people are poor because of laziness or lack of will" was 57 percent in Japan, 61 percent in the United States and 49 percent in Australia and Korea, as compared to 25 percent or less in Finland, Spain, Sweden and Turkey. Likewise, the share of respondents believing that «people had a high chance of escaping poverty» was 80 percent in Japan and between 70 percent and 80 percent in Norway and the Unites States, but 30 percent or less in Germany, Poland and Spain.
Ohtake and Tomioka (2003) carried out a similar survey on the peoples’ perceptions of income inequality and redistribution in 2002. Respondents were residents in Japan between ages 20 and 65. According to Ohtake and Tomioka (2003), the share of those who agree the notion that «without income dispersion, people will not make full effort» was as high as 71 percent. The share of respondents believing that «one’s income is determined by the person’s past choices and efforts» was 57 percent; conversely, the share of those who agree that «luck determines income» was 42 percent.
These results suggest that the Japanese believe poverty as the outcome of individual choice rather than the outcome of external events over which individuals have little control. Similarly, the Japanese perceive inequality as a driving-force for making efforts to individual success. In this respect, Japanese society seems to be more similar to the US than to most countries in Europe. Thus, it is not surprising that the support for redistribution through government activity is one of the lowest in Japan among the OECD countries (Figure 6).
Another indicator that characterizes every aspect of Japan’s social cohesion is gender. In fact, women are more likely to support redistribution11, engage in volunteering activities, have extensive social networks. According to the Statistic Bureau’s Survey on Social Life 2001, 30.6 percent of women engaged in volunteering activities, as compared to 27.0 percent of men. Using the World Value Survey, OECD (2006) reports that the proportion of male respondents who «rarely» or «never» had contact with friends, work colleagues and other acquaintances in places of worship, and in sports and cultural association in their normal daily life is significantly high in Japan (Figures 7 and 8).
Social Inclusion12. Empirical research on the social inclusion is still in its infancy in Japan. Until very recently even the measurement of poverty has been rarely done by researchers due to inaccessibility to large scale official survey data. Moreover, there had been few panel data which capture the dynamics of into and out of poverty.
In this section I will show some of the results of a preliminary study which the author is engaged to develop a social exclusion index. This survey, entitled Survey on Social Life
9 The reduction rate of Child Rearing Allowance after the fifth year of receiving this benefit will be determined based on the level of progress in the assistance measures for working and the condition of divorce among other factors. This reduction rate will be applied from FY2008.
10 The following draws on d’Ercore (2006) and Ohtake and Tomioka (2003).
11 Ohtake (2005). Alesina and La Ferrara (2001) argue that women (along with blacks) in the US tend to support more redistribution, possibly because they perceive a lack of equal opportunities.
12 This section heavily draws on Abe (2007).
200613, targeted 1,600 residents of a large city nearby Tokyo Metropolitan Area, who are above 20 years of age. The sample was extracted by the random sampling method, and the number of respondents was 584 (the response rate=36.5%). The survey was carefully designed to maintain comparability with the preceding studies in the EU and UK (Bradshaw et al., 2000; Burchardt, Le Grand, and Piachaud, 1999; Tsakloglou and Fotis, 2002; Moisio, 2002; Abe 2005b). Although this survey is a one-shot, cross-sectional survey, it asks the respondent’s personal history regarding work, marriage and major accidents in retrospect. Besides, the respondents are asked to evaluate the standard of living when they were 15 years old.
A problem inherent in social exclusion is how to distinguish absence by individual preference from enforced absence (absence due to one’s inability to obtain the item in spite of their need). For instance, a television, an item that has achieved a diffusion rate of close to 100 percent, is sometimes not possessed because of individual preference. With this respect the respondents are asked to clarify the reason for the absence. When it is clear from the answer that the respondent «does not wish to possess it (or does not wish to do so),» the answer is not counted as exclusion.
Table 1 (not shown for copyright reasons) summarizes the results. The situation of social exclusion is captured in eight dimensions; (1) basic human needs (BHN), (2) material deprivation, (3) exclusion from social services, (4) social networks, (5) housing, (6) leisure and social activities, (7) perceived poverty, (8) relative poverty.
Using this data, Abe (2007) analyzes the determinants of social exclusion. According to her results, the commonly shared features of socially excluded people are: male, aged 50-59, unmarried and jobless. Those who experienced sickness, divorce and unemployment also had high risk of social exclusion. Employing the same data, Oishi (2007a) reveals that being brought up in a needy family is significantly correlated to adulthood poverty in Japan.
Social Empowerment. Empowerment concerns the means and processes that enable people to actively participate in social relations and influence the immediate and more distant social and physical environment. Indicators of social empowerment consist of five domains: knowledge base, labor market, openness of institutions, public space and personal relationships.
Let us briefly take a look at the indicators of knowledge base. Even in 2001, 50 percent of men and 40 percent of women aged 10 years or older had access to internet in Japan (Statistics Bureau, Survey on Social Life 2001). The proportion of households with cell phones was 96.8 percent in 2004, with more than half of them had web-ready cell phones. Similarly, 77.5 percent of households were equipped with personal computers in 2004 (Statistics Bureau, Survey on the Use of Communication Tools 2004). Adult literacy rate is as close as 100 percent, and 50 percent of high-school graduates went universities and colleges in 2004. Overall, we could say that the Japanese, on average, have good access to knowledge base.
On the other hand, women are still under-represented in the society. According to the UNDP’s Human Development Report 2006, Japan ranks 42nd out of 75 countries in the Gender Empowerment Measure (GEM). As for political representation, Japan ranks the second-lowest in the proportion of parliamentary seats held by women among OECD countries (Figure 9). The proportion of women engaged in managerial positions stood at 10.1 percent in 2005, which is far behind the level of such countries as the US (42.1 percent), Germany (35.2 percent) and Sweden (31.8 percent) (Cabinet Office, Gender Equality in Japan 2006).
13 This study was conducted by a research company outsourced by the National Institute of Population and Social Security Research as part of the Grants for Health and Labour Science, “Study on the Effect of Social Security System in the Context of Social Inclusion in Japan” (Chief researcher: Aya Abe).
Such under-representation of women in politics and business basically originates from the tradeoff between work and family life. Japanese women’s cross-sectional profile of labor participation rate is still clearly M-shaped, with two peaks in the twenties and the forties, reflecting the fact that they tend to leave the labor market after giving birth to a child and to return to the market after their children grow up (Figure 10). The dip in the thirties has become shallower in recent years, but this is largely due to increased labor participation of unmarried women. If we focus on married women in this age group, the labor participation rate was 49 percent in 2003, almost the same level as thirty years ago (Statistics Bureau, Labor Force Survey). In fact, about 70 percent of women who had been working a year prior to the first childbirth left the job in 2002 (MHLW 2002).
The low labor participation rate of women at childbearing ages could be attributed to several factors. First, there is a chronic shortage of licensed daycare centers for children and out-of-school hours care centers14. As of October 2004, there were 22,494 licensed daycare centers which care for 2.09 million children, or 26 percent of pre-school children in Japan. However, there remain more than 20 thousand children on the waiting lists for daycare centers. To meet the growing demand for childcare services, the government has launched on the Angel Plans (1995-1999, 2000-2004) to increase the childcare capacity especially for children aged 0-3 years old. Still, it is not easy to establish new daycare centers while running huge fiscal deficits in both the central and local governments. Thus, the government has been coping with the long waiting lists by deregulating the minimum standards, privatizing the existing public licensed daycare centers.
Second, the Japanese husbands tend to work such long hours that they neither do household tasks nor childrearing. In fact, about three-fifths of Japanese men work over 43 hours, two-fifths work 49 hours or more, and one-fifth over 60 hours per week (OECD, 2004). Thus, whereas a typical Japanese wife irrespective of her working status spends daily the average of 5 hours on household tasks and care, a typical Japanese husband spends just 36 minutes on such activities (Statistics Bureau, Survey of Social Lifestyles 2003).
Third, there is a wide-spread belief that a mother's presence during a child's first three years is seen as crucial to "healthy" development (the so-called 'three-year-old myth (sansaijishinwa)') (Ohinata, 2000). Faced with the pressure to be a good mother, even the most educated women often give up their careers against their will.
It is a common understanding among researchers in Japan that the tradeoff between work and family life is one of the main causes of declining fertility. Women’s job interruption during childbearing ages resulted in firms' reluctance to invest in female employees and thus creating male-female wage gaps. In order to raise fertility, the government has implemented reconciliation policies such as an expansion of parental leave and increased availability of childcare services.
On the other hand, the government has done little to review the prevailing tax and social insurance system which favors full-time housewives and part-time work of married women. In fact, the earnings distribution of married women has a spike in the neighborhood of one million yen. Specifically, under the current tax system, wives who work as part-time employees have strong incentives to set her annual earnings less than 1.03 million yen. Otherwise, Exemption for Dependent Spouse (0.38 million yen) will no longer be applicable to their husbands and they must pay income tax as well. Moreover, if she makes more than 1.3 million yen annually, or if her working hours exceed 75 percent of the regular workers, she could no longer enjoy an exempt from social insurance premium. For fear of losing these
14 For details see NIPSS (2003), Oishi (2007b).
tax and social security benefits, many married women choose to constrain their earnings close to 1.03 million yen15.
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15 In addition, allowance for spouse provided by the husband’s employer creates another incentive for the wife to constrain her earnings less than 1.03 million yen.
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Figure 1. Population projection for Japan
Source: National Institute of Population and Social Security Research, Population Projection for Japan (December 2006 estimate).
Figure 2. Trends in inequality in Japan: 1987-2002
0.420 0.400 0.380 0.360 0.340 0.320 0.300
1987 1990 1993 1996 1999 2002
Source: Oishi (2006a).
Original, unadjusted Gini coefficient
Household size" adjusted Gini coefficient
Figure 3. Non-regular workers as a share of total employment in Japan
35 30 25 20 15 10 5 0
Source: Statistics Bureau, Labour Force Survey.
CCGCGCOOOOOOOOO
OOOOOOOOOOOO
Figure 4. Earnings distribution of married men in Japan: 1987-2002 _
Work income in 2000 prices (10 thousand yen)
2002 --------- 1993
1987
Work income in 2000 prices
(10 thousand yen)
------- 2002 --------- 1993
------- 1987
Work income in 2000 prices (10 thousand yen)
2002 -------- 1993
------ 1987
Source: Abe and Oishi Figure 5. Child Rearing Allowance
Child Rearing Allowance
Introduction of “welfare to work” scheme
^Earnings
Figure 6. Perceived inequality and attitude towards redistribution
Source: d’Ercore (2006).
Figures 7&8. International comparison of gender differences in social networks
Percentage of persons who rarely or never spend time with friends, colleagues or others in social groups
I I Men
Women
20
18
16
14
12
10
Q I LU I LU LLI LU LLI LLI LLI LU LLI LLI .—.Ш1Ш1Ш1Ш1Ш1Ш1
Figure 9. Parliamentary presentation of women
Percentage of parliamentary seats held by women
2005 or latest year available
50 45 40 35 30 25 20 15 10 5
Source: OECD (2006).
Figure 10. Female labor participation rates in advanced countries
om en
20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64
Age
“Sweden
-US
Japan
N etherlands Korea Italy -France “Germ any
Source: Abe and Oishi (2007).
