Every five years the government reviews the national pension system, which, like national health insurance, is roughly divided into two plans: one for regular salaried employees and another for everybody else. However, the pension system for salaried employees, known as kosei nenkin, has an attached feature for a salaried employee’s spouse, which is known as the “number 3” system. Spouses of salaried employees get their own pensions without having to pay premiums, as long as they don’t make above a certain level of income. Essentially, it applies to spouses who qualify as full dependents on the breadwinners’ tax returns.
Though the system has only been in effect since the 1980s, it was obviously fashioned at a time when many wives of salaried male employees were so-called full-time homemakers, meaning they kept house and raised children on their own. But since the high asset bubble burst in the early 90s and the employment structure changed, many wives have had to go out and work in order to make ends meet. Nevertheless, the number 3 system has been maintained by the government, and the long-term result has been a perversion of the original purpose of the program. Because of the income ceiling for number 3 dependents, the women who benefit (and they are all women) limit the amount of work they do so as not to exceed that limit and thus remain qualified for the pension and other benefits enjoyed by dependents.
As everyone knows, Japan is going through a labor shortage right now, with employers desperate for workers, especially at the lower end of the income pyramid. One result is that wages have gone up for this demographic, and since a lot of part-time workers are number 3 dependent wives, they are reluctant to work as many hours as their employers want them to work. Moreover, because their pay has actually increased in recent years, they feel they have to work even less since they reach their ceiling for the year more quickly than they did in the past.
On May 5, the Asahi Shimbun ran a fairly long article about this dilemma, since the government plans to submit pension-related bills during the current Diet session. The income ceiling has become a topic of discussion in the media lately due to its influence on the employment situation, so Asahi profiled several women who are affected. One woman in her 40s from Mie Prefecture, raising two secondary school-age children, told Asahi that she is “bitter” about the income ceiling. She married in 2007 and worked some temp jobs for a while until she became pregnant. Home finances were tight and she wanted to go back to work and put her child in daycare, but her husband disapproved. He said he would provide for the family and wanted her to remain home doing housework and looking after their child, adding that these were tasks he would never do. Nevertheless, once the child and a second one had entered kindergarten she started working part-time at a construction company. She calculated that she couldn’t make more than ¥80,000 a month, otherwise she would lose her tax exempt dependent status and have to start paying into the pension system. The income ceiling was ¥1.6 million a year for the tax exemption and ¥1.3 million a year for the number 3 pension status.
At the time, she felt these exemptions were “benefits,” but now she feels differently. Firstly, she recognized how the system effectively enforced gender roles, which her husband strongly supported. This became a point of contention between them, and eventually they separated and then divorced, with her gaining custody of the children. She is now looking for work that she can do from home so that she still has time for taking care of her children. But as she points out, because she “had to consider my husband’s feelings,” she did not work continuously in the past and thus accumulated no bankable job experience. Deep into middle age, she is only qualified for low paying jobs that have no chance of advancement.
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