The Yomiuri ShimbunTo pass the public pension system to future generations in a stable manner, further reforms are vital. The latest results can be considered to have demonstrated anew such a need.
The Health, Labor and Welfare Ministry has released a report examining the fiscal conditions of the public pension system. These are the results of provisional calculations, made every five years, of the pension benefit levels that people will be able to receive in the future, under scenarios that presume various economic factors.
When benefits for those who start receiving them at the age of 65 are compared with the average after-tax income of the male working population, the ratio stands at 61.7 percent in fiscal 2019. Even if the economy sees positive changes in future years, the ratio of benefits at the starting age is expected to decline to 50.8 percent in fiscal 2047, as benefit levels are lowered to support the entire system amid the declining birthrate and aging population.
Under this estimate, the system would barely be able to maintain its benefit levels at 50 percent or more of the average income of the working population, levels that the government had promised earlier. Yet under an assumption that the economy becomes sluggish and the employment of elderly people and women does not advance as hoped, there is a possibility of the ratio falling below the 50 percent threshold in the 2040s. This is a scenario about which future generations cannot feel optimistic.
The pension system is so arranged that premiums paid by working-age generations provide the allowance given to older generations. In light of the declining birthrate and aging society, it is inevitable for the number of workers supporting the system to decline. The important thing is to increase the number of those who support the system and to reinforce its foundations.
Act without delay
One key point is to expand the application of employees’ pension systems to cover non-regular workers, including part-time workers.
The latest examination found that the greater the scope of expansion becomes, the higher the levels of future pension benefits will grow. Such an expansion would also have the merit of leading to a stable life in old age for non-regular workers.
Should the requirements for people to be covered by employees’ pension systems be expanded, the issues of how to review conditions — such as the number of employees at each firm and their wages and working hours — will be focal points. It is also necessary to win the understanding of business firms, which, together with their workers, assume their share of paying pension premiums.
Increasing people’s choices as to when to start receiving their pension benefits is also an issue that needs to be discussed.
Greater choice is expected to mean a greater number of elderly people working longer, thus remaining as supporters of the system. The welfare ministry is considering allowing people to put off starting to receive the benefits until as late as the age of 75. In order to realize this, it is essential to create an environment for elderly people to be able to continue working.
There are also calls for either easing or ending the system of reducing the old-age pension paid to elderly working people with a certain amount of income. The move would be intended to enhance elderly people’s willingness to work. Should the reductions be ended, however, there would arise problems such as an increase in expenditures of public pension funds.
In order to sustain the public pension system, curbing pension benefits is also called for. It is important to reinforce the functions of the “macroeconomic slide mechanism,” under which the level of pension benefits is to be lowered gradually in line with changing macroeconomic factors.
The release of the latest report was made three months later than the time when the previous report was unveiled five years ago. This autumn, the government plans to start a full-fledged discussion on system reforms and submit related bills to the ordinary Diet session next year. The government should tackle designing the system without delay.