Paper
Japan Improves Benefits for the Unemployed, Aged Workers, An
Published Jan 1, 1994 · Lillian Liu
Social Security Bulletin
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Abstract
Japan's Parliament has passed amendments to two employment-related laws (the Unemployment Insurance Law and the Law Concerning the Stabilization of the Employment of Older Workers) to improve income security for the unemployed, aged workers, and parents on child care leave. Unless otherwise indicated, these amendments will take effect on April 1, 1995. They represent a continuation of two decades of incremental measures designed to address concerns of labor-market change due to an aging population and a declining number of young workers entering the labor force. The 1994 amendments stipulated that Japanese firms must extend the retirement age beyond age 60 starting in 1998. The amendments also modified unemployment benefits, especially to those aged 60 or older; introduced income supplements for workers aged 60 to 65; and offered partial wages to parents on "child care leave." The Government has determined that current monetary reserves will be able to absorb the projected cost increases resulting from the legislated benefit improvements and income supplements. It has no plans at the present time to raise contribution rates for unemployment insurance from the employers or employees. Company retirement age to increase to 65.-- Due to an aging labor force and a seniority-based wage system, Japanese firms have generally preferred to employ younger workers, especially new entrants to the labor force, and let go their older workers at age 60 or earlier. After a decade-long campaign by the Government to urge employers to set the company retirement age at 60, only 20 percent of firms now retire their employees earlier than age 60. The 1994 amendments stipulated that, starting in 1998, the firms must set the retirement age beyond 60 to gradually increase to age 65 (without a specified time table for reaching this goal, however). For the time being, the Government is "urging" Japanese firms to keep their workers on the payroll after reaching age 60. Under the Japanese social security system, the first tier universal flat-rate public pension benefit is payable at age 65, while the second earnings-related tier is payable at age 60 for men and age 58 for women. Pending approval by the Diet (Parliament) is a separate set of social security amendments introducing an "earnings test" for the second tier of pension payments to those aged 60 to 64 to be phased in beginning 2001 for men and 2006 for women. Older workers with monthly earnings exceeding 340,000 yen (about US$3,400) would no longer receive the earnings-related benefit; those with monthly earnings between 200,000 yen and 340,000 yen (about US$2,000-US$3,400) would see their pension benefits offset 1 yen for every 2 yen of earnings. It is believed that the pending proposal of an "earnings test" coupled with the Ministry of Labor's promotion of employment for workers aged 60 to 64, will help older workers remain active in the labor force and save social security expenditures. Changes in unemployment benefits.--The 1994 Amendments to the Unemployment Insurance Law favored primarily persons aged 60 or older. In Japan, the official unemployment rate for older workers is more than twice the rate for younger workers. The current law provides unemployment compensation of 60 to 80 percent of wages (higher percentage to lower earners). Benefits are payable, after a 7-day waiting period, for 90 to 300 days in 1 year, according to the length of covered employment, age group, and employment prospects. …
Japan's Parliament passed amendments to employment-related laws to improve income security for unemployed, aged workers, and parents on child care leave, with no plans to raise unemployment insurance contributions from employers or employees.
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