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Social programs should erase anxieties of the future

By: Unknown author
The Asahi Shinbun, January 4, 2002

If nothing is done, young people will either be overwhelmed by the weight of the welfare burden or they will bolt from the system in disgust. Some women will refuse to have babies out of concern for their insecure future.

The scene is the Prime Minister's Office building, one night late in December 2000. Yuji Fukunishi, 56, a counselor, is just taking a break after a hectic day of negotiations with a Finance Ministry official regarding budget allocations for projects to benefit senior citizens when he is confronted by a young bureaucrat with a conundrum: ``What will happen 10 to 15 years from now when the population of old people shoots up?'' ``Ten or 15 years from now?'' Fukunishi asks, as if the young official had touched a sore spot. Maybe he had been telling himself that in 10 or 15 years, he will be old enough to qualify for old-age pensions and benefits. 

The scene is the opening of Taichi Sakaiya's 1976 near-future novel, ``Dankai-no Sedai'' (The Baby Boom Generation). In the quarter-century since then, such omnibus tales are being acted out in the real world. 

The number of people born during the immediate post-World War II baby boom was about 10 million. Soon, Japan's fate will depend upon whether those boomers will only be ``beneficiaries'' of the national pension program, or both beneficiaries and benefactors.

`Lifetime net benefits' 

Experts in social programs use the term ``lifetime net benefits.'' This represents total public benefits provided during a person's lifetime, including pensions, medical, education and other services and allowances, after taxes, fees and premiums for public pension, health and other insurance programs. 

One government estimate, assuming that the present systems would be maintained, shows that people aged 60 and older would receive lifetime net benefits of 57 million yen. But people in their 20s would be 13 million yen in the hole, and people 19 and younger would be down as much as 42 million yen. The baby boomers, now in their 50s, are expected to barely eke out any benefits at all. 

If nothing is done, young people will either be overwhelmed by the weight of the welfare burden or they will bolt from the system in disgust. Some women will refuse to have babies out of concern for their insecure future. Those who have lost hope in Japan may well leave for good. A flight of capital could be expected for the same reasons. If that happens, Japan has no future. 

On paper, the solution seems so simple: The number of people who support the social security system should be increased, while the number of those supported by the system should be decreased. It would be best if some of those who now benefit from the system would start paying into it. 

But it is difficult to implement such a policy within the confines of social security policy. Housing, industrial and other policies must also be crafted and integrated to create a mechanism for a society not worried about its future. 

Consider, for example, an old house. There should be a way to properly assess the value of an old house and improve the market for them. 

Families in which the head of the household is 65 or older, on average, have property and other assets valued at about 40 million yen. But they complain about the insecure future and struggle at saving. One chief reason for their effort to save is that they cannot sell their properties at satisfactory prices. Many people are in housing too large for an older couple and want to move to a smaller house or apartment. 

In the United States, where people often trade housing as they get older, it is not unusual for elderly people to sell off big houses and, for example, move to an easy retirement in Florida. These people do not need to save more if they can live on the capital gains from selling their homes. 

Here, from research by NLI Research Institute and other organizations, are some interesting comparative statistics on the inheritance assets of elderly people in Japan and the United States: In the United States, the value of assets of elderly people is five times their annual disposable income; In Japan, their counterparts would have accumulated up to 20.8 times their annual disposable income. Because they are so insecure in their old age, people in Japan unwittingly bequeath to their children inheritances that are as much as 20 times their annual income. 

In Japan at present, an old house has no market value, and it costs money just to demolish it, even if it is still fit to live in. Nothing could be more wasteful than that. If there were a better secondary market for homes, elderly people would sell their homes easily. And if there were a wider market for refurbished homes, future generations will have an easy life. There will be a larger market for renovation of houses, and there would be less waste from demolition. 

``From seniority in age to seniority in health.'' This is a slogan thought up by Ikuo Sugawara, head of the service policy division of the Ministry of Economy, Trade and Industry. People's age on the one hand and their health and income on the other are in reverse correlation. As people grow older, their health declines and their earnings shrink. This has been the tacit assumption at the heart of the social security system. But such an assumption is no longer valid. Sugawara posits a society in which as many elderly people who are fit, willing and able, can work, and the money from welfare programs not spent on them from the national treasury could be used for those really in need. Sugawara urges changes in the conventional mindset and the institutions based upon it. 

We endorse his idea and suggest that mandatory retirement be extended, or even abolished, if possible. We also suggest reducing the portion of employees' pension benefits that reflects salary that pensioners get while they work. In a society in which people can choose between active participation-whether in work at a business or for a nonprofit organization-or a quiet life, the question that should be addressed is whether people should receive different incomes even after retirement based upon the salaries they were paid when they were working. 
While some elderly people must live as a pensioner even if they want to work, some young people lose hope in the future because of the onerous financial burden. Society's fundamental makeup must be changed. 

Change industrial policy Industrial policy must be changed to eliminate the sense of insecurity. Job-creation programs from the government tend to be too optimistic about the impact of deregulation upon job-creation, and tends to be heavily influenced by compartmentalized public administration within every government ministry. Unemployment is indeed important. But it would be counterproductive for the government to resort to conventional remedies, which rely upon public works spending, because of an obsessive preoccupation with creating jobs. 

The strategy needed now is one that gives preference to allocating resources for industries that will directly eliminate a public sense of insecurity and that will create jobs and expand demand for goods and services. Among industries related to that objective may be health, environment and entertainment for the elderly. We hope that, by ending squabbling among government ministries, new industries would be established that would erase people's concerns about the future and would also create more jobs and increase demand. 

We have just six or seven years left before the baby-boomers reach mandatory retirement age. That does not leave very much time to arrange for the necessary steps to eliminate the sense of insecurity.