New pension ceiling meant to help low-paid workers may hit housewives


Starting this month, workers who make at least ¥1.06 million a year will be enrolled in the kōsei nenkin pension plan, which means they and their employers will split the monthly contributions on a 50-50 basis.

Previously the ceiling for eligibility was ¥1.3 million a year, which means people who made less than that amount didn’t have to enroll in the program, though they were required to pay into the basic pension (kokumin nenkin) plan on their own. The exception is homemakers — almost always housewives — whose spouses are enrolled in the kōsei nenkin plan at their own workplaces. They were still automatically part of the basic pension system and would receive payments when they reached a certain age, but they didn’t have to contribute to it at all.

Though the decrease from ¥1.3 million to ¥1.06 million doesn’t sound like much, the change is causing consternation among employers and nonregular workers, especially housewives who qualify for the basic pension exemption, because if those housewives’ pay exceeds the ceiling, they are automatically enrolled in the kōsei nenkin system and thus lose their special status, which means their husbands cannot claim them as dependents.

As a result, a lot of women who work and made less than the ceiling before are trying to find ways to cut their hours or otherwise reduce their cumulative wages. Not surprisingly, their employers are helping them do this, even though it likely means they will be hit with labor shortages, at least in the short term. That’s because most of these companies don’t want to have to contribute to their employees’ pensions — probably the main reason they hired housewives in the first place.

These women are simply supplementing their household incomes with part-time work that usually doesn’t pay much more than the minimum wage. If they earned wages above the ceiling they would not only have to start paying into the pension system but also file their own income tax returns. In addition, they would have to enroll as individuals in the shakai hoken (company-based national health insurance) program, since they would no longer be part of their husband’s.

Housewives are actually unintended casualties of the change. The government finally came to the realization that many ostensibly part-time workers are now breadwinners for their households, given how the Japanese work environment has shifted over the years from a seniority-based lifetime-employment system to a contract employment system. It was decided that irregular employees should receive the benefits of the kōsei nenkin plan since they were probably working full-time anyway and had families to support.

Previously, they still had to pay into the basic pension system, subscribers of which shoulder all of the contributions themselves, something many part-timers couldn’t really afford, since the basic pension system was originally designed for self-employed workers. By reducing the ceiling, these irregular workers’ employers will be forced to take on some of that burden. The so-called No. 3 housewives (“No. 3” refers to their special classification under the pension law) just happen to be caught up in the vortex.

It should be noted that the ¥1.3 million ceiling was conceived with these housewives in mind. The government revered the economic model of a breadwinning male and a wife who kept house and raised their kids full-time. But as more women entered the workforce to make a little extra money and small businesses needed cheap labor in some sectors, the ceiling was established so that there would be no financial pressure on either side of the employment divide. Part-timers in general weren’t a decisive economic force until recently.

According to the new law, employers will have to pay into the kōsei nenkin system for workers who make at least ¥88,000 a month or ¥1.06 million a year. And whereas previously they would have had to pay for employees who work at least 30 hours a week, now they have to pay for those who work at least 20 hours a week. Also, the employee has to have the “intention” of working for the company for the full year in question, though there’s nothing in the law that explains how such an intention is determined. The main loophole for companies who don’t want to join is that if they have less than 501 employees, they can opt out of the system.

According to a report published last December in the business magazine Toyo Keizai, the new scheme will affect about 250,000 workers nationwide, meaning if they don’t do anything to change their current work situation, their employers will have to enroll them in the kōsei nenkin and shakai hoken systems.

During a Sept. 23 broadcast of its “Jiron Koron” series, NHK ran a simulation of what the changes would mean in the long run. They used as their example a husband who makes ¥5 million a year as a regular company employee and a wife who earns ¥1.3 million a year working part-time. After the change, the wife will be paying ¥13,078 a month in pension and health insurance premiums, whereas before the change as a No. 3 dependent she paid nothing. If she works the rest of her life, when she retires she will receive about ¥86,000 more a year in kōsei nenkin pension payments than she would have if the changes had not been enacted and she were just receiving the basic pension. The balance would not be in her favor, however, since contributions toward that extra ¥86,000 would have been ¥300,000 a year.

The system becomes even more punishing when you take into account the fact that No. 3 housewives who make at least ¥1.06 million are no longer tax dependents. In that case, their husbands will lose the dependent allowance that many companies give their regular full-time employees. And with the loss of the dependent deduction they will also have to pay more in taxes. A household where the husband makes ¥5 million a year plus a ¥240,000-a-year family allowance and the wife makes less than ¥1.06 million will take home ¥5.1 million a year. If the wife makes ¥1.06 million and loses her dependent status, the household will only take home ¥4.75 million.

But if the wife decides to work more and makes ¥1.6 million, the household will take home ¥5.19 million. In a sense, the government is hoping that more married women will, instead of cutting their work hours to retain their No. 3 dependent status, reject that status and join the workforce in a more positive way.

The obstacles to this ideal are formidable. First of all, not all employers are going to be able to afford all these new “full-time” workers and may either cut their wages or limit their hours. Secondly, many women may favor short-term advantages over long-term ones — though their pensions will be larger the more they work, they also will be contributing more of their wages along the way. Moreover, the government is overhauling the social security system on a continuing basis, so by the time these women reach retirement age, which is gradually being moved further away, their expected payments may have shrunk.

NHK lists a variety of measures the government must take, such as increasing deductions or tax credits for households with dependent children, improving day care and nursing care services to help homemakers who choose to work more, and fortifying laws that encourage working from home and discourage arbitrary transfers. Tax laws should also be modified. One proposal is a “couple deduction” that would take into consideration a husband and wife’s combined income.

If the government is serious about getting more women into the workforce, these issues must be addressed.

Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month.

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