Japan relies on misinformation to keep foreigners out of pension and health care programs.

Watch how it works.

Japan Today carried a story about how the Japanese government is looking to modify the guideline for enrolling an employee in the Shakai Hoken (employer’s social insurance) from workers generally being in with 30 hours per week, to 20 hours per week. And including an annual minimum of 650,000 yen in wages.

This is, effectively, not much of a change: because the government doesn’t really “enforce” the guideline. Now, if they had said, here is the new guideline, and here are the penalties for not following the guideline . . . Things would be different. But, as you read the comments, the topic inevitably turns to: “why should I have to pay?”

The bottom line is that social insurances (old age pension, disability, unemployment, and the biggie, health insurance) act as a tax on wages. Who bears the incidence of tax? Well, the employee–not the employer, who simply withholds what it would have paid to the worker in order to cover the insurances.

This is Step One in the analysis, and where most of the Japan side gaijin community stop. If they can get around paying, they have “won”. And this has gone on for years.

But then, there is Step Two. Step Two is that once certain employers figure out that they can politick the enrollments into “let’s dodge it together, and you’ll save money!”, then the wages are all bid down to a level, where it would have been better that everyone follow the rule.

Why? Because when your buddy does everything under the table, it forces you to do everything under the table to be competitive. In the context of the Eikaiwa (English conversation school) “industry”, the Japanese government knows exactly what it’s doing. It is a way to cheat foreigners out of the pension and health care coverage.

The runners of Japan are expert in letting the hot air, of a lot of talk, mask the scam that is going on right underneath. They think that hot air doesn’t smell. Or that the hot air covers for the hot gas coming from someplace else.

4 thoughts on “Japan relies on misinformation to keep foreigners out of pension and health care programs.

  1. I think it is a mistake to assume that the government is even thinking about the eikaiwa industry when it thinks about these changes to employment law. More than a third of workers in Japan are non-regular (part-time, dispatched, contract etc) workers. Pretty much all Japanese companies and business models are now dependent on these cheap workers. Not just a couple of English school chains.

  2. I also don’t believe there is any deliberate conspiracy or policy to keep foreigners out of the national pension and health plans. Essentially, we are out of sight and out of mind. If anything, there are elements – especially at the local levels where they actually administer the programs – where they want us (foreigners) to enroll. Unlike the average Japanese demographic which is increasingly being represented by aging seniors, we generally tend not to be a tax on the healthcare system nor are many of us yet beneficiaries of the pension plan – instead, we tend to be attractive contributors. If anything, the bureaucracy ought to be targeting us – as many of us are vulnerable to visa renewals – and force us into enrolling into their social insurance programs.

    I’m on the NHI (National Health Insurance) but not on the National Pension plan. While I enjoy the relative ease-of-use and flexibility of the former (no need to call in for “permission” to an HMO or private insurance firm before seeking treatment), I am not convinced it makes sense for me to enroll in the latter (I already cashed out a 3 year refund on my first stint out here). So, for the time being – and as long as the law is not forcing us to enroll- I am staying out.

    1. Mark, I appreciate your comment. Here are the pieces that I think you’re missing.

      Social insurance premiums are collected to support a benefit. You are right, that if the foreigner population is younger and healthier than the general population, they should cost less relative to the whole. The problem is, if you are running a policy of limiting the amount of foreigners in your country—while all the while keeping a revolving door going so it doesn’t look like you’ve shut off your major trading partners—then you run a system where you don’t enforce your rule. In effect, the bill keeps growing for the foreigners who are “voluntarily” not participating, and if they later try to make themselves more legit, they have this huge bill to face.

      If a foreigner shows up with a pre-existing condition, it is much better (that is, cheaper) for the Japanese to have that person OUT of their system. If a foreigner comes down with cancer, let’s say, while in Japan, it is cheaper for the Japanese to kick that person back to his/her home country. Clean and neat. “Hey, you weren’t in our system to begin with!”

      Additionally, there is question of something the economists and tax-code wonks call “incidence of tax”. This is the question of who ultimately pays for a government benefit. Even if an employer is required to pay 50% of social insurance premiums, the employer can simply reduce the amount offered to the worker by the amount of the tax. If there is a minimum wage, of course, there is a floor on how much this can be done, and in those cases, the “incidence of tax” pushes it over to be an actual cost on the employer.

      With foreigners, there is a minimum wage besides the one in Japanese statutes. It’s the one that supports the working visa. Therefore, there is a leverage that the foreigner would be granted by the Japanese government to gain a better wage. To some in Japan, this means the foreigner is “winning”, and so therefore they go lax on enrollment by the employers to take away that “advantage”.

      You are right that, in localities that are starved for money (especially outside Kanto region), they would love to collect that premium. But Tokyo doesn’t want them to.

      Oh, and with kokumin nenkin (national pension when it is separate from the employer’s Shakai Hoken insurance): a certain large percentage of the cost is borne out of the general treasury. Participants pay that 15,100 yen a month coupon. But the funding on the future benefit is designed to come, in part, out of the general treasury. (That’s the big debate about raising the consumption tax to 8%, with a later rise to 10%.)

      The 15,100 yen coupons alone won’t support the expected benefit to be paid out–the promise that is being made to the coupon payers. Everyone knows this, because the money coming in right now is supplemented with that general treasury appropriation. (That is, it is the way the system is set up, and has been.) When they keep foreigners out, they also keep those foreigners away from the supplemental payout from the general treasury. Plus, it allows wages to be bid down—for visa status purposes—by the amount of that premium/tax as well.

      You threw the word “conspiracy” in there at some point (in the beginning). I don’t think it’s conspiracy, and I tend to find that when that word is introduced, it is kind of a lazy way to not look deeper at something. I think it’s more this sort of zone of lawlessness that the Japanese runners of things allow to come down on the foreigner population in Japan. The social insurance requirements are there. But when the Japanese government last made its half-hearted attempt to “enforce” these regulations, they also allowed a handful of noisy foreigners who ran businesses employing foreigners to protest the planned (i.e. telegraphed) enforcement. Some months later: no enforcement. This is how the Japanese do it. They don’t outright deny the benefit, they get others to make it that situation for them. “Policy” isn’t quite the word, either. It’s really more pattern and practice.

  3. Reblogged this on Hoofin and commented:

    An oldie but goodie. October 1 will mark 8 years that the US and Japan have had the totalization agreement regarding social security. It will also mark the opening of the Obamacare Health Insurance Exchanges—where uninsured Japanese in America will be able to purchase the same plans as US citizens, and receive the same terms and benefits.

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