Higher wages, lower pay? ‘Annual income ceilings’ affect Japan workstyles: survey

TOKYO — Japan’s part-time and other irregular laborers have adapted to so-called “annual income ceilings” that discourage people from working more due to obligations to join social insurance when their annual income surpasses a certain amount, causing their take-home pay to shrink.

Seikyororen, or the National Federation of Consumers’ Cooperatives Workers’ Unions, which organizes many short-time workers including nonregular employees, recently conducted a survey targeting union members who work both below and beyond the annual income ceilings to sound out their thoughts about the system.

As the annual spring labor offensive has gotten underway, momentum for pay hikes is picking up on both the management and labor ends, just as in 2023, due in part to ongoing price hikes. Amid these circumstances, the “annual income ceiling” issue has come under a renewed spotlight. Due to wage growth, workers have in some cases seen their income surpass the threshold for exemption from mandatory social insurance or eligibility for spousal exemptions for income and residential taxes. This gives rise to cases where wages increase yet workers receive less due to taxation and other obligations.

There are several such thresholds, like the 1.06-million-yen (approx. $7,100) and 1.3-million-yen ($8,700) ceilings, and some workers opt to work less to prevent their income going beyond those borderlines. This is said to be a factor contributing to Japan’s labor shortages.

In the questionnaire, Seikyororen canvassed 203 part-timers who work beyond the thresholds and have signed into social insurance, and another 204 laborers who work below the borderlines and have not joined social insurance programs, comparing their backgrounds and workstyle decisions.

In the findings announced at a Feb. 22 press conference, 64.4% of workers who have not taken out social insurance said they “haven’t thought about” getting insured, while 34.1% answered that they have. When asked the reasons for not thinking about social insurance coverage, with multiple answers permitted, 78% of respondents agreed “the current workstyle is just right” for them, while 32% said they wanted to work short hours to use the remaining time to themselves, indicating that they attach importance to short-time working.

Meanwhile, when those who have thought about enrolling in social insurance were asked why they remain uninsured, 62% responded that it was because their take-home income would go down, while 52% said their husband’s spousal benefits would be cut and another 21% revealed that their husband told them to adjust their income within the bounds of being eligible for the allowance for dependents. These results suggest the respondents are focused on the negative aspects of working beyond the annual income ceilings.

When those who have obtained social insurance were asked why they have done so, with multiple answers permitted, 44.8% noted that they thought about their future, followed by 25% who said it had become difficult to continue working short hours, and 23% who said that if they are to get insured anyway, the sooner the better. These respondents apparently appreciated the positive aspects of social insurance enrollment.

In the questionnaire’s written section, many uninsured respondents complained that joining social insurance would lower their take-home pay, followed by statements that they cannot work more hours due to household chores, raising children and providing care to family members. These respondents called for pay hikes to the point their take-home income would not be reduced, or lowering user fees for day care and nursing care services.

Among insured respondents, many stated that workers should be able to join social insurance programs regardless of income, followed by calls for raising hourly wages to 1,500 yen (approx. $10) or more.

Seikyororen chairperson Emiko Yanagi commented on the findings, “Some business operators are reluctant to raise wages for nonregular workers, worried those employees may start working less because of the annual income ceilings. However, the survey findings have made clear the need for sharp pay hikes and the improvement of the social security system to allow people to work without undue worries. We’d like to tackle these issues in the spring labor offensive.”

(Japanese original by Satoshi Tokairin, Tokyo City News Department)