January ,2018

Japan Center for Economic Research

What should Japan do to prevent
widening of inequality?
Yuji Masukawa
Tomoya Suzuki
Shintaro Mitsubayashi
Yui Shoji
Miki Sasano
Takahisa Honda1

<Table of contents>• Current Condition 1… p3

In a general indicator, Japan's gap isn’t large.

• Current Condition 2…p4

The realization of an equal society is still far away.

• Background of inequality 1…p5

Japanese public expenditure is small.

• Background of inequality 2…p6

Non-regular workers are increasing.

• Solution 1…p7

Improve the educational loan/grant system.

• Solution 2…p8

Labor market reform is necessary.

• Conclusion…p92

Current condition 1: In a general indicator, Japan's gap isn’t large.
[1-a] Gini coefficient in japan[1-b] Percentage of the top 1% income
as a whole

0.60
0.55

25%
Initial income

20%

Redistribution income

0.50

15%

0.45

10%

0.40

5%

0.350%
1961
66
71
74
7780
83
86
8992
9598
2001
04
07
10130.30(year)(Source) MHLW Survey on income redistribution

1920 30 40 50 60 70 80 90 2000 1014
(year)

CanadaFranceGermanyJapanUKUSA

Italy(Source)World wealth & income database3

Current Condition 2: The realization of an equal society is still far away.

4

Background of inequality 1: Japanese public expenditure is small.
[3-a]Accounting for changes in wage inequality of the world (average annual percentage changes)(Source) OECD Divided We Stand(2011)[3-b]Japanese Gini coefficient improvement rate

(Source) MHLW Redistribution of income research(2014)[3-c]expenditures on educational institutions(Source) OECD Education at a glance(2016)

5

Background of inequality 2: Non-regular workers are increasing.
[4-a]Percentage of non-regular workers
40（％）[4-b] Wage by type of employment / age class
450

38400

36350

34300

32（Ten thousand yen）

250

30

200

28

150

26100

24（Source）Ministry of Internal Affairs andCommunications

Non-regular worker

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

02004

20
2003

50
2002

22

Regular worker（year）（Source）Ministry of Health, Labourand Welfare

（age）

6

Solution 1 : Improve the Educational Loan/Grant System[5-a] Parents’ Annual Income and Children’s Education

70
60
50
4030
20100(%)

3130

55

49

44
2162

16
104University

4-6
6-8Vocational school

68-10
Between schools

10- (million yen)
Employment(Source) CRUMP, “Course tracking survey of high school students primary report”
[5-b] Why Low-income Households Students
Did Not Apply for a Loan/Grant System
Worried whether I can repay(AnnualIncome)22

Not know much about theloan/grant system
The grade did not reach thecondition[5-c] Income Contingent Loan

Until a certain income (an annualincome of 3 million yen) is obtained,
there is a "grace period"

35
11Other3 million yen

4Unnecessary

28010203040 (%)(Note) “Low-income” means an annual household income lessthan 4 million yen(Source) Kobayashi (2015), Empirical study of cost-sharing
and student assistance policy in higher education

Enrollement
PeriodGrace Period(Source) Japan Student Services Organization

Repayment Starts

7Solution 2: Labor market reform is necessary.
[6-a]Comparison of wages between fulltime workers and part-time workers(%)
100Wages of full-time workers = 100
78.8 79.3

80
7060

70.8 71.4

56.6 59.6

89.1
83.1

[6-b]Four requirements of dismissal(1) The necessity of manpower reduction.
(2) The employer made efforts to avoid dismissal.
(3) The choice of personnel is reasonable.
(4) Sufficient consultation between labor and management.

[6-c]Percentage of employees who areunwillingly working as non-regular workers(among total non-regular workers)
(%)

30

24.3

40
20

17

16.8
15.4

11.1

20
108.2

00
15-24
(Source) Ministry of Health, Labour and Welfare

25-34

35-44

45-54

55-64

(Source) Ministry of Internal Affairs and Communications

65-(age)

8Conclusion.
• In a general indicator of gap, Gini coefficient and Percentage of the top 1%
income as a whole, Japan's gap is not large.
• The relative poverty rate in Japan is on an upward trend, and the poverty rateof children is at the same level as the average of OECD countries. Both rates
need to be improved.
• Education has a strong power to decrease inequality, but the Japanese education
expenditure and redistribution to younger generations is insufficient.
• The proportion of non-regular workers continues to rise and the wage gap isincreasing.
• We suggest to improve the educational loan/grants system to allow allstudents who wish to study can do so regardless of their parent’s income.
• Lastly, we should embrace an ‘Equal pay for equal work’ mentality, and should
improve the non-regular workers’ terms of employment.
9Thank you for your kind attention.

Yuji Masukawa(Nikken Sekkei LTD)
Tomoya Suzuki(Nippon Life Insurance Company)
Shintaro Mitsubayashi(Chubu Electric Power Co.,Inc)
Yui Shoji(Higashi-Nippon Bank,LTD)
Miki Sasano(Akebono Brake Industry Co., Ltd.)
Takahisa Honda(Nikkei Inc)

10