Most Japanese women must choose between having a career and having children. 

Japanese society has largely failed to change from households having traditional roles of the housewife and salary-man. The long work hours, the social security and tax system, and a society organised around that traditional household structure is difficult to unpick. What’s needed is deep institutional change across Japanese society.

There has been some progress. Whereas female labour force participation and the birth rate have both been low, the participation rate for women has increased rapidly in the past decade to 73 per cent and is now higher than the United States and OECD average. 

Labour shortages have driven government policy and many companies to change. But the gender wage gap, at 24.5 per cent, is the second highest in the OECD and ranks poorly by developing country standards as well. 

The increase in participation rates of women in the workforce has been dominated by part-time or casual work by older women — so called non-regular work that attracts lower pay, less job security and a lack of training and development. The Japanese labour market is bifurcated between regular workers on full-time ‘lifetime’ employment contracts and non-regular employment, which now accounts for 36.7 per cent of the total workforce. Over half of all female employees are in non-regular employment while only 23 per cent of male employees are in non-regular work. 

Many women who have career-track full time jobs are expected to leave the workforce once they have children. That social norm is persistent and leads to underinvestment in human capital development for women. It lowers the birth rate and hampers female participation in regular employment. 

International evidence shows that with household tasks — especially raising children — shared between both parents and a society organised around that norm with much less overtime, ample childcare and social support, the birth rate and participation rate can both be higher. Career and child rearing need not be substitutes for women. 

Social norms and the institutions that reinforce them resist change but there are obvious steps to take that can accelerate positive change. 

In this week’s lead article, Sagiri Kitao argues that ‘outdated policies are no longer protecting low-income individuals but are instead a major drag on women’s productivity and wage growth’. 

Kitao identifies the social security support for dependent spouses that acts as a disincentive to women’s work and career development. The policies were designed to help dependent spouses with limited earnings but times have changed and policies need to change as well. 

Dependent spouses earning below 1.3 million yen (US$8410) a year are exempt from social insurance contributions if their spouse has insurance coverage through work. Once earnings go above the 1.3 million yen threshold, they face a tax of 30 per cent on all earnings. 

That’s an average tax, not a marginal tax on additional earnings above the threshold. The tax system penalises women in those situations for earning just above the threshold. It’s a textbook case of a benefit cliff that leads many women to target earning just below the threshold. 

It’s bad tax policy that is reinforced by other tax breaks and company support for dependents, all in line with the low threshold. 

Kitao’s modelling shows that without the poorly designed policies ‘the participation rates of the cohort of women born in the 1960s would have been 14 per cent higher’. They also would, on average, have earned 30 per cent more. 

Rarely is there such an obvious binding constraint that can be loosened. Removing barriers to female participation that also help to narrow the gender wage gap will accelerate the change needed in Japanese society. 

With an ageing and shrinking population Japan cannot afford to have one of its biggest assets — highly educated women — significantly underutilised. There’s an economic imperative, not to mention the moral one, to having Japanese women participate more fully in the labour force, especially in managerial and leadership roles. 

Only 10 per cent of lower house members in Japan’s parliament, the Diet, are women. The proportion of women in the upper house has been growing gradually and is now 26.7 per cent. But less than 5 per cent of mayors and prefectural governors are women. In business only 11.4 per cent of executives are women. 

Getting rid of the policies that deliver these terrible outcomes for women in the workforce, as Kitao demonstrates, will alleviate Japan’s labour squeeze and give a substantial boost to Japanese productivity. 

The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.