Child Poverty and Pension Worries For The Japanese

At 16 percent, Japan’s relative poverty rate — the share of the population living on less than half of the national median income — is already the sixth-worst among the 34 OECD countries, just ahead of the United States. Child poverty in working, single-parent households  is by far the worst at over 50 percent, making Japan the only country where having a job does not reduce the poverty rate for that group.

As Prime Minister Shinzo Abe charges ahead with his “Abenomics” policies to revive economic growth, things look set to get harder, not better, for Japan’s working poor. This deepening divide between the haves and have-nots could threaten Abe’s vision of Japan’s economic revival

Having ramped up spending on public works projects and business incentives, the government has also moved to shore up its finances, cutting welfare benefits last summer and last month raising the national sales tax to 8 percent from 5 percent. The regressive tax puts the biggest burden on the poor, and another hike to 10 percent is planned in a mere 18 months.

For those like Ririko Saito, who lives hand-to-mouth with her daughter on an hourly wage of ¥1,080 ($10.6), last month’s tax hike has made life considerably harder. An extra ¥1,300 a month she will be receiving from the government to offset the higher costs of essentials is just not enough to avoid the repeated utility cuts.

“As it is, we can only afford discounted groceries.” Saito said. “I’m not sure how we’ll manage, but I’ll just have to find a way.”

Team Abe’s success in reversing 15 years of price declines that have hurt business confidence and investment also squeezes the poor, who cannot count on bonuses or financial profits to offset rising living costs as he artificially stokes inflation.

Japan says it plans more aid for welfare recipients, largely through job training. That, however, is little consolation because even those with jobs often live under the poverty line. The government does not officially define the “working poor,” but the number of part-time, temporary and other non-regular workers who typically make less than half the average pay has jumped 70 percent from 1997 to 19.7 million today — 38 percent of the labor force.

“The Abe administration’s stance is more about fixing things, including poverty, with a trickle-down effect from overall economic growth,” said Takashi Oshio, a professor at Hitotsubashi University specializing in social security. “There’s little political capital spent on issues like alleviating child poverty. It doesn’t garner votes.”

Some economists say a broad recovery in consumption, a key ingredient of Abenomics, may not last if more and more households struggle to hold above the poverty line. In the longer run, problems associated with poverty such as worse access to quality education, poor health and crime could increase fiscal burdens and dent Japan’s growth potential by shrinking the pool of skilled workers.

“Rising poverty leads to a wider gap in education,” said Makoto Saito, an economist at NLI Research Institute. “Japanese companies are supposed to be creating value-added jobs, but at this pace there won’t be enough people to fill those positions.”To be sure, higher sales taxes are widely seen as inevitable given Japan’s public debt is more than twice the size of its economy, and growing.

But economists say the government could limit the pain with policies that redistribute wealth better. With current social spending skewed toward pension and health care schemes that mostly benefit the elderly, Japan is the only OECD country where the poverty rate among working households and households with children rose after benefits and taxes, according to a recent study by the Organization for Economic Cooperation and Development.

“Politically, it’s easier to get the understanding of the electorate since multiple tax rates would benefit everyone, not just the poor,” said NLI’s Saito.”But if effective countermeasures aren’t adopted to help low-income earners, the poverty rate is just going to keep rising.”

The majority of Japanese people are also worried about their financial future according to a recent survey by the Japanese Government which revealed that around two-thirds of Japanese aged 35 to 64 are concerned they will not have enough money to last through retirement. The Cabinet Office survey of around 6,000 people late last year revealed growing anxiety among people that savings, retirement payouts and public pensions will prove insufficient in old age.

About 67 percent said they feel they will have inadequate economic resources to fall back on after they retire, with three-quarters of that group stating their provisions are “quite inadequate.” Only 1.6 percent said they feel they will have enough money and 21.7 percent said they will have the bare minimum. Around half of those surveyed also said they want to be able to keep working after they turn 65.

The survey’s results will go into a white paper on Japan’s aging society to be adopted by the Cabinet in June.

Source: The Japan Times, the OECD

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