Necessary Conditions for the Designing of Institutional Reforms
(1) Setting 2025 as the target date for reforms
The “Vision for Social Security” sets its time frame through 2025. This is because beyond 2025, we cannot make reliable predictions of population composition and the labor force participation rate. The aging of the Japanese population is expected to continue beyond 2025, but the design of society a half century into the future needs to be discussed under the theme of comprehensive social reform, rather than as estimates or projections.
(2) Population change and social security
It does not make sense to separately compare the burdens shouldered among generations. Succeeding generations may shoulder a lighter burden (provision for and sending of money to their parents) than precedent generations, and receive greater benefits (related to education, housing, social infrastructure, living standards, etc.) The contents of the burden shouldered varies from generation to generation, and the role of social security is to implement mutual assistance through understanding and collaboration among generations and within generations. Further, productivity increases, technological innovation, and increases in the employment rate for women and the aged are important elements for stabilizing the basis of social security. In addition, the foundation for “the energy of an aged society” is to build a system that is able to fairly evaluate the contributions of women and the aged, and in this context we need to develop conditions that ensure them affordable wages and equal treatment. Moreover, it is unlikely that goods and services offered in the area of welfare and social security will be rationally distributed through market principles alone, so that there is a need for the public function of properly providing and distributing these goods and services. Even if the provider of the goods and services is a private enterprise, the provision and distribution of these “social common goods” must fulfill social standards.
(3) Financial methods for funding social security (tax fund method and social insurance method)
In funding social security, a choice must be made between the “tax fund method” and “social insurance method” depending on the characteristics of each. Also, if tax money is used, a decision has to be made whether to choose a direct tax approach or indirect tax approach. Our proposal to use a tax fund method is the result of our review of appropriate methods for the characteristics of individual schemes – pension, medical care, nursing care and welfare – rather than an a priori preference for this method over the “social insurance method.”
(4) Relations between benefits in kind and cash benefits on social security and the setting of benefit levels
The problems regarding the relations between benefits in kind and cash benefits on social security and the setting of benefit levels can be described below, in order to ensure the consistency of the social security system as a whole.
In order to ensure that the administration of social security schemes is based on “participation and the sharing of responsibility” by citizens and users, and on the recipients’ “right to choose” the services required, medical services and nursing care coverage, which are benefits (service) in kind, should in principle be funded by the social insurance method. Also, in order to improve the efficiency of these schemes through a “sense of participation” in their administration by the insured and users, the insured should be asked to bear earning-related insurance premiums, and users should contribute a certain amount of the service charge.
In order to make it possible for the aged and the disabled bear insurance premiums for medical care and nursing care insurance plans as well as a certain amount of the service charge, they must be ensured of stable incomes, requiring the retention of the current level of pension benefits (some 60% of annual income earned by workers in active service) and the strengthening of income guarantees for the disabled.
(5) Major challenges related to the foundation of social security Full applicability of social insurance
As current social insurance plans are unable cope with diverse working forms, including part-time and temporary workers, an increasing number of people have failed to enroll, and a hollowing out of social insurance is taking place. The application of social insurance to all working people is essential for strengthening the basis of social insurance schemes.
“Family unit” and “individual unit”
Changes in the employment structure and family patterns are taking place behind the scenes, and there is a need to move the basis of social security away from the “family” and toward the “individual.” On the other hand, a simple changeover to the “individual” implies a danger of increasing imbalances in benefit levels, including a lowering of pension benefits for single aged women. From the perspective of securing the necessary benefits for people in need, it is necessary to conceive specific design of the desirable schemes.
Social security and full employment
The foundation of the sustainability of social security is the vigor of economy, which is shouldered by people. It is precisely a society that is able to secure employment opportunity for all people, including the aged and women, that ensures the sustainability of social security schemes.