TOKYO, Oct. 2, 2019—In September, Japan entered an extended period of progressive tax and social welfare cost increases, especially for retirees and senior workers. A government policy commission commenced debating raising pension receiving qualification ages and encouraging old folks to work until they cannot continue to pay taxes while the government ended keeping the sales tax rate at 8% and raised it to 10%, effective Oct. 1, 2019.
But it’s questionable whether old folks would response to this policy unless sweeping changes are introduced to moderate the cost burden curb.
The commission was asked by its chair, prime minister Shinzo Abe, to comprehensively explore mapping out all conceivable demographical visions of aging Japanese society over the next millennium on the premise of the Japanese people’s longevity stretching to 100 from the current average of 83.96 (2016 data):
–How old the legal employment age (!?. Is there such an age?) for senior workers should be for them to qualify for public pensions smoothly after retirement;
–Whether senior workers, e.g., those over 60 or 65 years old, can be core contributors of taxes, healthcare, elderly nursing care, and other social costs;
–How much taxes and social costs those old folks can foot for keeping aging Japan going over the next millennium without bankrupting its finances.
The planned increases are needed because Japan’s social welfare system is structured on the basis of young working classes footing the cost for retired people, the commission said. Young people cannot shoulder mounting social welfare costs because of dwindling child birth rate, which stood at 1.44 per woman in 2016, one of the lowest in the world and compared with 1.80 in the United States. The rate has notched slightly higher but not much no matter how much the government provides child birth incentives to young couples.
As the commission began debating, the government began offering free pre-K nursing and high school tuitions starting in October. But those measures’ effects are seen as iffy. The program will be financed with tax revenues from increasing the sales tax rate to 10% from 8%, effective Oct. 1, 2019, the increase which Abe earlier said was for paying for elderly society, not child births.
Government estimates forecast that Japan’s social welfare expenditures in 2040 – the peak year of population aging — would rise to 24% of gross domestic product from 21.5 percent at 121.3 trillion yen ($1.2 (trillion) in 2018.
All those sound logical, maybe. Reality is different: If a retiree that receives a typical public pension of about 250,000 yen a month earns an additional sum from work, say, three days as a part-timer, he/she would lose access to various benefits accorded senior citizens, plus faces a steep jump of the National Health Insurance monthly premium, as well as the nursing care insurance premium. Those are on top of national and local income taxes.
The bottom-line is that he/she may earn an additional 200,000 yen a month but almost half of it will go to taxes and social welfare costs, and they also will lose various benefits that local municipalities give to people that live on pensions alone.
Further, if you as a senior citizen between 65 and 70 years old and is earning more than 460,000 yen a month in pension and salary, then your basic public pension payment is suspended.
Better think twice before working, old folks!
(More information about the government commission is available at:
https://www.kantei.go.jp/jp/singi/zensedaigata_shakaihoshou/)