, while the working-age population, aged 20 to 59, will shrink by 5.3 million. Government policies to increase the wage income of women and facilitate better work–life balance will be crucial to managing this demographic change.
Japan has seen some progress in increasing women’s workforce participation. The greatest progress has been made in increasing the number of women who maintain ‘regular’ or full-time positions following the birth of their first child. The percentage of women with one child under three years old who kept regular employment rose from 18 per cent in 2002 to over 30 per cent in 2015. The percentage of female university graduates in regular employment rose to over 40 per cent in 2015. Women in non-standard employment also increased and the percentage of those out of the labour force declined.
Various policies have been instrumental in increasing the number of women in the workforce. From 2005, firms with more than 300 employees were required to develop action plans to create more family-friendly working conditions over the next two to five years. In late 2007, the government, employer associations and the National Center of Labor Unions agreed to adopt the Work and Life Balance Charter.
In terms of labour law, the parental leave allowance — which stood at 40 per cent of pre-leave monthly earnings in 2000 — increased in 2014 to up to 67 per cent for the first six months of leave. Sick leave for the care of children was also introduced. And, most notably, a six-hour workday option for workers with children less than three years old was mandated in 2010, with a two-year grace period for smaller-sized firms.
But a shortage of day care could jeopardise these improvements. On a positive note, the majority of Japanese day care is subsidised by the government. Yet, since the end of World War II, the stock of day care supply has been more abundant in rural areas, where more married women work in the home than in urban areas. Increased women’s labour force participation rates are causing severe shortages in metropolitan areas.
The very slow increase in the supply of day care is a product of poor policy. The Ministry of Health, Labor and Welfare should make special regulations and budget allocation rules to improve access to childcare in urban cities where land prices are high and demand is rapidly rising. The government should also provide incentives so that spare spaces at kindergartens and elementary school premises are used for day care.
While the number of women continuing to work following their first child has increased, little progress has been made in improving work culture or income for married part-time workers. The tax and social security system favours low-earning homemakers, giving married women an incentive to limit their paid employment.
Under this system, earned income below 1.03 million yen (US$10,276) per year is free of national income tax, but income earned over this amount will be taxed not only at one’s own tax rate, but also at their spouses’ tax rate by eliminating the spousal tax deduction. Spouses of wage and salary earners are also exempt from social security taxes if their income is below 1.3 million yen (US$12,976) per year but are given full health and long-term care insurance benefits, as well as the full basic pension entitlement.
The Abe administration announced in 2014 that it would change the income tax system, which has implicitly supported the typical family model of a male breadwinner and a full-time female homemaker. But, so far there has been no change in the income tax system. As for social security tax, from October 2016, part-time workers will be required to pay social security tax if they work more than 20 hours a week, have annual income over 1.06 million yen (US$9980) per year and are employed by firms with more than 500 employees.
However, this social security tax reform will be made without any reform concerning benefits to dependent housewives. Financial planners in women’s magazines have recommended that in order to increase their net income, housewives should earn either over 1.5 million or under 1.06 million per year due to this social security tax change. Firms also benefit if housewives keep their income below 1.06 million yen, as they are required to pay half of the social security tax. Thus, this change in the social security law may further encourage housewives to limit their workforce participation to around 1 million yen (US$9410) in annual income.
On the brighter side of the picture, some firms have trialled improving the spousal allowance on salaries — a salary customarily given to primary income earners who have a dependent spouse. Toyota, for example, announced in 2014 that it planned to reform the spousal allowance so as not to penalise spouses who earn over the tax limit. The National Personnel Authority is also expected to announce reforms to spousal allowances for public servants in 2016.
In order to encourage housewives to increase their earnings, the wage system also needs to be remedied.
The fundamental barriers to womenomics are the labour practices and workplace norms that separate long-term employees from other forms of employment. Japanese long-term employment is well known for high job security and good company-based training, while giving the employer strong discretion in worker placement, relocation and hours.
Women have long been treated as second-class workers even in full-time positions, with companies expecting them to quit work when they have children. Team-based work habits and long work hours have alienated workers who cannot prioritise work, causing many women to quit work when they marry or have their first child. This commonly restricted work opportunities for women who left the workforce to take up low-paid, part-time jobs.
Government campaigns to change workplace norms to promote a better work–life balance are starting to change general attitudes towards women in the workplace. But, the restrictive promotion mechanisms built into the long-term employment system are still generally left untouched.
The Abe administration is discussing reform to help implement the principle of ‘equal pay for equal work’. If this discussion leads to new job opportunities for workers re-entering the labour market, it will provide another critical reform for women. Together, these reforms should help make womenomics work.
Nobuko Nagase is Professor of Labor Economics and Social Policy at Ochanomizu University and Visiting Scholar at Harvard University.
This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Reinventing Japan’.