Review of Population and Social
No. 7,Factors
1998, 129–144.
ThePolicy,
Economic
for the Declining Birthrate

129

The Economic Factors for the
Declining Birthrate
Naohiro YASHIRO*
Abstract
This paper examines economic factors affecting the declining fertility rate in Japan. A major cause of this continuous decline is the increasing
participation of women in the labor force. This, in turn, increases the opportunity
costs of having children for a family. These opportunity costs are closely related tothe scarcity of full-time jobs for women due to the fixed employment practices ofmajor Japanese companies. A crucial policy for stabilizing the fertility rate is to
reduce the opportunity costs of women by increasing child-care services andpromoting the creation of jobs for those who are beyond the child-rearing age.

1.

Introduction

The number of births in Japan has constantly declined since the second peak of the
postwar period in 1973, when the first postwar baby boom “mass” generation had
its children. There were fewer births in 1995 (1,190,000) than in 1966 (1,360,000),
the particular year, occurring once every 60 years, according to the Chinese calendar, in which it is believed that a girl born will grow up to be a shrew and will havedifficulty finding a spouse, and when people refrain from having babies. This decline in births is confirmed by the total fertility rate (TFR). The TFR decreased
from 4.5 births right after the war to 1.42 births in 1996. The current TFR is far
below the level (2.08 births) required to stabilize the population. It is almost certainthat the reproductive-age population started falling in 1995 and will be followed bya decline in the population as a whole at the beginning of the twenty-first century.
According to the median projection published at the beginning of 1997 by the
National Institute of Population and Social Security Research, the TFR is likely torecover in the year 2000, after which it will remain at the 1.6 level. In the past,
every new population projection tended to make a downward revision in the fertility rate, as shown in Figure 1. Population projections are not the only predictions
that turn out to be wrong. However, unlike economic and other estimates, population projections are always revised in the same direction, suggesting some problems
in the estimating methodology.
The prospect that fertility rates will recover quite soon assumes that there has
been no major change in the desire for marriage and having children based on__________________________________________________________________________________* Institute of International Relations, Sophia University.
[ 129 ]

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Source: National Institute of Population and Social Security Research, Future Population
Projections of Japan-Medium Variant.

Figure 1 Revised fertility rates of previous population projections

surveys of couples’ planned number of children. It has also been observed that thelowered fertility rate caused by late marriages can be recovered by late births. The
fact that people’s attitudes and behaviors are constantly changing invalidates the
traditional methodology for estimating population based on the assumption thatpast attitudes and behaviors will be unchanged in the future. In Japan, as in countries in the West, the greatest elements of change are women’s increased employment and hence their enhanced economic status.
In this paper, women’s expanded employment will be first addressed as a major
contributor to the lowered birthrate in postwar Japan. Second, the problem ofhigher opportunity costs will be considered as women’s employment is linked to thecountry’s traditional employment practices. Third, a microeconomic analysis will
be made of the influence of childbirth on women’s employment behavior. Finally,
new policy directions to cope with the declining birthrate will be proposed.
2.

Factors Leading to Lowered Birthrates
and the Problems Involved

Before addressing the difficulties posed by fewer children, we must ask ourselves
why the declining population is a problem. The global population is ever increasing. Indeed, overpopulation in large cities of Japan is notable. Some believe that if
the Japanese population continues to decrease in the twenty-first century, people
will be able to enjoy a higher standard of living. Others endorse the principle that

The Economic Factors for the Declining Birthrate131

the government should not interfere with individual family decisions about having
children, such as the “have more children, increase the population” policy as it was
during the wartime.
Certainly, there are rich nations with small populations such as in Scandinavia.
The problems lie not in the size of the population but in the process of population
reduction. Children are future consumers as well as workers to support production
activities. For the past two decades, the population of Japan has increased by about
1.1% annually. The large population has been the source of a highly qualified labor
force and the driving force for the country’s economic growth. These conditions
will change drastically in the early twenty-first century, when, according to current
projections, the population of Japan will be half of its present size of 123 million;
one hundred years later, it will be reduced to 60 million people. If birthrates decline
even further than the median projection, the population will become much smallerin the future.
Another problematic aspect of this pattern of decrease is that it will create
greater gaps in the age distribution of the population. A relative decline in theworking-age population is occurring largely among younger generations. Heavier
burdens to support the aged population will be placed both on the government andon families. Working generations will suffer from a lowered income as well as
increased taxes and social security contributions. Hence, it is not feasible for theJapanese to enjoy better living conditions with a smaller population without chaotic
congestion in large cities, while maintaining the present high standard of living.
If the ongoing decrease in the birthrate is a result of people’s rational decision
making, the government should not interfere. If, however, conventional institutions
and practices are not responding to socioeconomic changes and thus are affecting
couples’ reproductive behavior, it is desirable for families and the society generallythat the government take action to remove such socioeconomic obstacles.
It is no longer possible to prevent the influence of a smaller population of young
people as a result of fewer births in the last several decades. When comparing 1992
population projections, which predicted early recovery of the birthrate, with therevised ones for 1997, the rates of the elderly population do not make muchdifference for the year 2020, but those for the second peak of the elderly populationin 2050 differ as much as 5%. This suggests that a policy to recover the birthrate
will require many years to bear fruit, a fact that should be considered in formulating such a protocol. The policy on birthrates developed today may produce irrevocable results in the future. In this sense, it is similar to the global environmental
issue.

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2. 1. Causes of Reduced Birthrates

Chronologically, two primary factors are responsible for the reduced birthrates inpostwar Japan. The sharp drop in the birthrate toward the end of the 1950s —after the postwar baby boom — was caused by a drastic decrease in families withmore than four children, due to a decline in infant mortality, ever-expanding urbanization, and a reduction in self-employed households, which formerly had many
children. These factors were no longer observed in the 1960s, and the fertility rate
per family remained stable at 2.1, the population replacement level.
The continuous dip in the birthrate over the last two decades has been a result of
the tendency among young people not to marry. This has been a major reason for
fewer births. According to the 1995 census, almost 50% of Japanese women between the ages of 25 and 29 were unmarried. A survey by the Ministry of Healthand Welfare in 1990 found that there was a direct relationship between women’s
ages on their first marriage and their educational background. The average age atmarriage for four-year university graduates was 28.1, 2.2 years older than that forhigh school graduates. Furthermore, women who lived in Tokyo married evenlater — at an average of 29.1 years. Considering the pace of delayed marriages, it
is probable that by 1997 the latter figure had risen to over age 30. This corresponds
to the extremely low TFR in Tokyo of 1.07.
The increasing number of women who marry later in life is closely associatedwith the rise in their rate of employment and the improvement of their economic
status. Yet it is often pointed out that a higher percentage of women were employedin the 1960s than today and thus the effect of their recent increased employment
should not be overemphasized. Such a notion, however, does not take into accountSource:Management and Coordination Agency, Labor Force Survey Annual Report.

Figure 2 Women’s participation in the labor force

The Economic Factors for the Declining Birthrate133

the difference in the nature of women’s jobs before and after 1975. Before 1975
working women were mostly self-employed, whereas after that year a larger proportion were employed by others. The percentage of employed women over age 15
continued to increase, whereas that of self-employed women decreased. As a result,the employment rate of women as employees has been higher in recent years (Fig.
2).
Moreover, lately the rate of women advancing to four-year universities, an indicator of the improved quality of employed women, has accelerated, and the gap
between male and female students has narrowed (Fig. 3). Not only has the numberof women entering higher educational institutions increased, but also more female
students are majoring in law, economics, science, and engineering — fields thatoffer better-paid jobs — instead of just traditionally women-concentrated areas
such as literature and education (Fig. 4). In 1995, 23% of Japanese women entered
universities, compared to 41% of the men. Given the recent tendency, this percentage will be higher in the future. An important factor enabling women to receive auniversity education is the high income of their families to pay for it. The numberof children in a household is also significant. When the average middle-class family
had four or five children, parents were inclined to send their sons to a university
and theirs daughters to a two-year college at the most. Today, when there are only
two children in a household, both of them are likely to receive a university education regardless of their gender. Hence, if the present trend continues, a “lower
fertility cycle” will emerge; less children — permitting girls to advance to higher
education — higher women’s employment rates — later marriages — low fertility
rates.

Source:Ministry of Education, Ministry of Education Statistics Directory.

Figure 3 Advancement to 4-year university by gender

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Figure 4 Majoring faculty of famale students at universities
2. 2. Marrying Late or Never Marrying

In previous population projections, fertility rates were seen to be recovered on the
ground that even though young people tended to marry at a later age, they would
marry eventually and have children. In fact, fertility rates showed a constant drop
among people in their twenties but rose among those in their early thirties. Also, in
fertility surveys more than 90% of unmarried women replied, “I am intending tomarry some time.” As such, the higher rate of unmarried young people was considered to be a temporary phenomenon that would not lead to a permanent increasein the number of unmarried people.
However, careful attention should be given to the results of attitudinal surveys on
marriage, because the demand for marriage is latent and becomes apparent incertain situations. A major reason for the overestimation of fertility in previous
population projections is the changed economic environment, in which the “cost”
of women for marriage tends to rise. Whether to marry or not is a question of thepast, when, for women, marriage was considered as a livelihood and equivalent togetting a permanent job.
Modern women’s behavior is based not on two-step thinking — “decide tomarry first, and find a spouse next” — but on continuous thinking — “keep working until I find an ideal future spouse.” In other words, if they do not meet apotential spouse, they dare not marry even by lowering their selection criteria. Just
as in the case of labor supply, the concept of “reserved demand,” meaning “I marry
myself,” can be applied. (When the market is in recession, a farmer chooses to havehis family consume the products that he grows, or the owner of a rental house lives
in the house himself.) A single life gives a woman the luxury of privacy even if her

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135

Figure 5 Narrowing wage differences between male and female workers(Ratio of female workers’ wages to male workers’ wages)

income may not allow a luxurious life. Therefore, it is only when a woman meetsa very attractive man that she agrees to marry even at the cost of sacrificing her
privacy.
Reflecting changes in the labor market and women’s rising level of education,
the wage gap between male and female workers in their twenties and thirties has
narrowed (Fig. 5). This further raises the cost for a working woman to resign her
job for the purpose of marriage or child-rearing. As such, the ongoing changes in
the marriage behavior of young women, including the increase in the number of
those who never marry, cannot be regarded as simply the preference for late marriage rather than for no marriage at all.
3.

The Influence of Japanese Employment Practices

When women receive a higher education and better employment opportunities
become widely available to them, the opportunity cost for those who marry goes up
and the percentage of unmarried people eventually rises. This is a common phenomenon in industrialized countries. In Japan, the traditional practice of ensuring
workers long-term employment heightens the opportunity cost of women for childrearing.
Typical employment practices adopted by large companies and government offices in Japan include:
1) Recruiting workers right out of school and ensuring them lifelong employment.

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2) Utilizing promotion systems and wage scales that are closely linked to workers’ age and years of service.
3) Organizing trade unions at the company/organization level rather than according to type of job.
Under a system providing selected workers — centering on new recruits — with asequence of intensive on-the-job training, these practices lead to the fixed divisionof roles between male and female workers within a company or a company group.
Companies ensure their workers long-term employment not because of theirpaternalism, but because they want to recover their investment in workers’ training.
The seniority-order wage system serves to contain workers within one company on
the premise of long-term employment by distributing an employee’s wages across a
total working life, with larger proportions paid out in later years. This system makes
it difficult for a female employee to continue working while taking care of her childfor the following reasons:First, chronic overtime work is taken for granted by both employers and employees as a means to return to the company its investment in the employees’ training
and to ensure their long-term job security. Such a system has two advantages: itraises the average capacity usage ratio of human resources, and it provides a buffer
against a recession by reducing the number of hours worked instead of the numberof employees. In such an environment, working mothers find it difficult to remainin their jobs on a full-time basis unless they have their own mothers who are willingto take care of their grandchildren.
Second, frequent personnel relocations and transfers are norms of Japanese companies in view of workers’ training through accumulating experience. Those employees who give precedence to a company’s convenience over their own are regarded as major players, whereas those who do not are secondary players, and theirroles are divided accordingly. When either of a working couple is relocated, it isusually the wife who quits her job to stay with her husband. This is one of the chiefreasons why women stop working for child-rearing.
Third, midcareer full-time employment opportunities are scarce. Because aworker is trained by one company, wages are paid in accordance with the position
awarded and, usually, the number of years worked from the time of employment
right after graduation school. If a woman wants to work again after she finishes
child care, what she can find is usually a supplementary job with a flat wage. Thus,
the opportunity cost for a woman who leaves a company to marry or have a childcompared to her potential lifelong wages while maintaining her job is quite substantial. The 1997 White Paper on People’s Life by the Economic Planning Agency
gives some estimates of the possible foregone income due to child-rearing for
women over a working life. One estimate compares two average 2-year college
graduates employed at age 20. Suppose one of these women gets married and has

The Economic Factors for the Declining Birthrate137

her first child at 27, when she quits her job, has a second child at 31, and thenresumes working on a part-time basis at 32, whereas the other one continues
working on a full-time basis until her retirement age. The potential income of theformer woman if she had kept working during the five years she spent raising her
children would be 19 million yen. The difference between the two incomes fromage 32 to retirement would be 44 million yen including retirement benefits, since
the wage scale for midcareer part-time employees is much lower than that forworkers who are employed right out of school.
Some may argue that such a situation is not specific to Japanese companies.
However, if workers’ training is not totally dependent on employers but can beobtained by the employees themselves at institutions of higher education and othertraining facilities or through various work experiences, then midcareer employment
opportunities for full-time workers could be expanded. If a worker’s expertise in a
specific field is properly valued in a company, he or she might be relieved of theobligation of being relocated or of working overtime. This would promote thesharing of household chores and child care by husband and wife and facilitate thecontinued employment of working mothers.
4.

Microeconomic Analysis of Reproductive Behavior

4. 1. Overview of Existing Research Studies

Studies linking women’s employment and lowered fertility rates in Japan abound.
Analyses using chronological data are provided by Osawa (1993), Ohbuchi (1982a,
1982b), Ogawa and Mason (1982), and others. Osawa’s study shows that women’s
increased participation in the workforce, supported by rising wages in the marketplace, has acted to suppress fertility rates. Using data from the five annual population censuses from 1970 to 1985, by prefecture, Ogura and Deckle (1992) make across-sectional economic analysis of fertility rates based on prefectural data. According to them, women’s hourly wages and land prices are the significant factors
in reduced fertility. They also point out that the lowered fertility rates of the 1980s,
though due to the increased number of women marrying later in life, were triggered by their increased participation in the workforce. Harada and Takada (1991),
on the other hand, show negative correlations between fertility rates and women’s
wages, and between fertility rates and housing costs.
As a verifiable analysis by individual household, Matsuura and Shigeno (1996)
estimated married women’s reproductive and employment behaviors using the1989 Household Survey and Savings Tendency Survey. The explanatory variables
for the fertility function were the husband’s income and assets. The expenditures ofeach household for culture and entertainment were used to judge the quality of a

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child’s life. The target families were those who owned their own homes without amortgage, whose husbands were white-collar workers, and who had a mother — ofeither husband or wife — living in the household. Similar explanatory variables
were applied to the employment function. Due to limited data, the target households for analysis excluded self-employed workers. Among the wives, no distinction
was made between full-time and part-time workers. A more recent study byNakamura and Ueda (1997) reveals that a working mother’s educational background and the availability of child day-care centers are decisive factors in thedecision on whether to continue working.
4. 2. Analysis of Married Women’s Employment Behavior

Based on the above studies, three factors determining the number of (under-18
unmarried) children of married women are considered: first, the family income,Table 1Analysis of married women’s employment behavior
Coefficient∂ Employment
probability /∂ Independent

Self-employed (vs. not employed)
Household income2)
Number of children3)
Age4)
Presence of persons in need of care
Presence of a healthy elderly woman5)
Constant− 0.000087− 0.244101***
0.031226***− 0.235802*
0.001022− 1.917775***0.00001− 0.00560
0.00567
0.00209− 0.01251− 0.36612

Employed (vs. not employed)
Household income2)
Number of children3)
Age4)
Presence of persons in need of care
Presence of a healthy elderly woman5)
Constant− 0.000325***− 0.402790***− 0.013532***− 0.487615***0.166209**
1.065789***− 0.00007− 0.07950− 0.00567− 0.10078
0.040400.40557

Variable1)
1.

2.

Number of samples
Log likelihood

6,093− 6210.81*** Significant at the 1-percent level.
** Significant at the 5-percent level.
*
Significant at the 10-percent level.
Notes:
1) Dependent variable is the employment behavior of married women under 60.
1 = Self-employed, 2 = Employed by others, 0 = Not employed.
2) Total income of the household except for the subject’s wage income.
3) Number of children aged 6 and below.
4) Age of the respondent.
5) Presence of an elderly woman between 60 and 70 living in the household except for those who are inpoor physical condition and are able to take care of themselves in daily life.

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139

which provides the means (income effect) for bringing up children; second, themother’s wages, which have elements of both income effect and opportunity cost(substitution effect) if she stops working to take care of a child; and third, theavailability of child care services, which will reduce a working mother’s opportunity
cost. For example, if a healthy elderly woman lives in the household, she may beable to care for the working mother’s child or children. From this point of view, ananalysis was made using individual data sheets of the 1992 Basic National Livelihood Survey by the Ministry of Health and Welfare. The following analysis is basedon the findings of Yashiro, Oshio, Ii, et al. (1997).
The probability that married women under age 60 are either self-employed(including as a family worker) or employees of someone else is estimated in comparison with women who remain unemployed throughout their lives. Self-employed women and female employees are distinguished because of the significant
difference in opportunity costs for these two types of employment. The explanatory
variables used here are the household income, woman’s age, number of children,and presence in the household of a healthy elderly woman or a person in need ofcare.
The number of children is a meaningful factor in the reduced probability that awoman will work as an employee. On the other hand, the presence of a healthyelderly woman living in the same house pushes the mothers’ probability of being an
employee upward. In the case of self-employed mothers, children do not lower theiremployment rates, and the effect of an elderly woman in the same house on themother’s work is insignificant. In other words, a trade-off between continued employment and child care occurs only in the households of women employed byothers (Table 1).
4. 3. Factors That Determine the Number of Children an Employed Woman
Will Have

In deciding how many children to have (based on an approximation of the numberof under-18 unmarried children in the families surveyed), a married woman willconsider the income level required by a household to pay child care expenses, theincome from her own wages as an opportunity cost of child care, her age, thepresence of a healthy elderly woman in the household to support child care, type of
employment, her husband’s occupation, the location of their residence, etc. (Table
2).
The survey results indicate that parameters of the household income, thewoman’s own income from wages, and the presence of a healthy elderly woman in
the house were statistically significant and the directions of their effects were as
expected. Older mothers have more children, but the degree of increase gradually
becomes smaller, showing a nonlinear pattern. For families living in large cities,

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Table 2

Fertility analysis (OLS)

Variable1)

Case 1Case 22)

Subject’s wage income2)
Household income3)
Subject’s age
Square of subject’s age
Husband’s self-employed dummy4)
Presence of a healthy elderly woman5)
Residence in a large city6)
Husband’s white-collar worker’s dummy7)
Constant− 0.000617***0.000069***
0.629610***− 0.008575***
0.051516**
0.170529***− 0.109981***− 0.094691***− 9.474066***− 0.000652***0.000071***
0.630620***− 0.008593***0.051056**
0.167253***− 0.107759***− 0.093519***− 9.464529***

Number of samples
R2

14,2140.1713

14,2140.1704*** Significant at the 1-percent level.
** Significant at the 5-percent level.
*
Significant at the 10-percent level.
Notes:
1) Dependent variable is the number of children (under 20, unmarried) of a married woman between 20
and 45.
2) Subject’s wage income is adjusted to be a part-timer’s wage. In practice, if annual income is less than
500,000 yen, her income is considered to be 500,000 yen.
3) Total income of the household except for the subject’s wage income.
4) Is husband self-employed? 1 = yes, 0 = no.
5) Is there any woman in her sixties in the household who does not need to be cared for? 1 = yes, 0 = no.
6) Does the subject live in a large city? 1 = yes, 0 = no.
7) Is husband a white-collar worker? 1 = yes, 0 = no.

restrictions imposed by housing conditions appear to constitute a greater factor inlimiting the number of children. If husbands are white-collar workers, they generally have higher educational backgrounds (although educational data were notobtained in this survey) and tend to prefer giving better quality by providing withhigher education by limiting the number of children rather than having morechildren. It was found that self-employed households (including farm households)
have significantly more children than others. This may suggest that such households need more children to provide the labor or that they wish their children to
succeed them in the enterprise. At the same time, it demonstrates that the trade-off
between self-employment and child care is weaker than it is for employed workers
because the self-employed family can adjust their work hours more easily.
One problem with this analytic method is the bias caused by the lack of data on
the potential income of nonworking wives. Wives who had to quit their jobs because of the incompatibility of child care and employment had no income, and they
were regarded to have a zero opportunity cost for child care. An attempt was madeto assume that the reservation wage (the wage level in the marketplace below which
no one will work) for nonworking wives was set to be 500,000 yen per year,

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The Economic Factors for the Declining Birthrate

calculated from the wage distribution of part-time women workers. An estimate
was then made considering this amount as an opportunity cost for nonworking
wives, but it actually did not show any notable difference.
As a next step, the target for analysis was limited to working women with spouses
to determine the influence of their jobs on the number of children they had. The
attributes of working mothers with one child and with more than two children werecompared with those of working women with no children (Table 3). The purpose ofthis breakdown was to see how much a woman’s trade-off between employment
and child care is influenced by an additional number of children.
It was found that working mothers with two or more children suffered greater
opportunity costs than those with only one child, and that the employment promotion effect of an elderly woman living in the household was greater as the number
Table 3

Multinominal Logit Analysis of Fertility
Variable1)

Coefficient1.

One child (vs. none)
Subject’s wage income
Household income2)
Subject’s age
Square of subject’s age
Presence of a healthy elderly woman3)
Residence in a large city4)
Husband’s white-collar worker’s dummy5)
Constant− 0.000824***0.000319***0.367711***− 0.004358***
0.406950***− 0.270676**− 0.282271***− 7.039632***

2.

Two or more children (vs. none)
Subject’s wage income
Household income2)
Subject’s age
Square of subject’s age
Presence of a healthy elderly woman3)
Residence in a large city4)
Husband’s white-collar worker’s dummy5)
Constant− 0.001484***
0.000447***
2.268487***− 0.030520***0.588888***− 0.556268***− 0.300444***− 39.473470***

Number of samples
Log likelihood

6,870− 5409.8000*** Significant at the 1-percent level.
** Significant at the 5-percent level.
*
Significant at the 10-percent level.
Notes:
1) Dependent variable is the number of children of a married woman between 20 and 45 with a job: one
child or two or more children (vs. no children).
2) Total income of the household except for the subject’s wage income.
3) Is there any woman in her sixties in the household who does not need to be cared for? 1 = yes, 0 = no.
4) Does the subject live in a large city? 1 = yes, 0 = no.
5) Is husband a white-collar worker? 1 = yes, 0 = no.

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of children increased. This suggests that when a working mother is expecting another child, a trade-off between continuous employment and child care is further
strengthened if her income is high and she receives little child care support.
4. 4. Views on Child Care Support

It is in principle up to individual persons and families whether to have a child ornot. However, given the magnitude of the eventual impact of their decisions on thenation’s labor supply and social security system, it is important to formulate governmental policies that will eliminate social factors preventing people from having
children. A family decision on having a child is made after consideration of income
level and the expenses involved in bringing up a child. Among the ever-risingexpenditures in raising children, “education cost” is the largest item. Surveys onhousehold expenditures reveal that the higher the income, the greater the ratio ofinvestment in the education of children to their incomes. It is not because people
think that “we want to have fewer children because the cost of education is sohigh,” but rather that “we will have a small number of children and invest thelarger amount in their education.” This change in emphasis from quantity to quality of the children lies behind the increasing demand for education. Thus thelargest cost of child-rearing is not necessarily the cost of education but the mother’sopportunity cost incurred as a result of her suspending employment. This opportunity cost is pushed upward by Japanese employment practices such as long-term
employment, long working hours, and promotion and wage systems based on seniority; it is further increased by the lack of child care services outside the family.
The incompatibility of child care and employment is widely understood by women
before marriage, and there is no doubt that women who are committed to theirjobs will hesitate to marry because of this constraint, accounting for the strongsocial pressure for having a child to married couples in Japan.
5.

Policy Implications

In Japan, the decrease in fertility per se is a serious problem, but it can also be
understood that social distortions are reflected in the declining rate of marriage andchildbirth. The current decrease in the birthrate is one of the consequences of rapid
economic growth and women’s improved economic status with traditional social
systems unchanged. A key to stopping this decline lies in the reform of existingsocial systems, including employment practices and family systems, so they will
respond to these economic changes. This paper has focused on a woman’s trade-off
between continued employment and child care, and on the need to raise both
employment rates and fertility rates by reducing the obstacles to them.
To recover the birthrate in the future, Japan must establish a social policy toThe Economic Factors for the Declining Birthrate

143

ensure the availability of child care support systems instead of leaving the responsibility of child care with women alone. The same approach is used to provide
security for the elderly. In the past, elderly care was basically borne by the family
and the need of children to support their parents’ in their later life was emphasized.
Now, however, the elderly are supported by public pension and medical insurance
systems.
The principal elements to be considered in formulating child care support systems are as follows. First, the basic premise is that women’s employment will be
expanded. Because their social advancement is regarded as the major cause of thedeclining birthrate, policies that will return women to the home are often proposed.
But retrieving the gender roles of the traditional family system is not feasible intoday’s life. It would be like establishing a policy to supply all our agricultural
products within our national borders in this age of an increasing international
division of work. Before attempting to determine whether a policy will be advantageous, however, we should consider first whether it is feasible. Now that it isobvious that starting in the year 2000, Japan’s labor force will decline due to abirthrate decrease that has already occurred, a more realistic policy would be onethat enables women to continue working while taking care of their children. The
answer, therefore, lies in the improvement of child care facilities. This is not tosuggest the upgrading of existing public day care centers, which target mainly lowincome families and which have strict user criteria. What is needed is an environment in which child care services can be a viable business in the era of an aging
population. The public expenditures allocated for the administration of costly public day care centers should be channeled to support facilities managed by theprivate sector. At the same time, the public sector should be responsible for monitoring and ensuring the adequate administration of private day care centers and ofprotecting the users’ interest.
Second, the existing tax system as well as social security system should be reformed to ensure equality for all women regardless of their employment status. The
current systems favor full-time housewives on the tacit premise that housewives
devote themselves to child care and to household work outside the employment
sector. They enjoy greater advantages in taxes and social security contributions
than working wives and unmarried women. These preferential systems should be
abolished, and the funds gained by this action should be directed to child care
support. With the elimination of these systems, the desire of full-time housewives
for employment could be met, whereas presently it is suppressed by the fear of
losing the tax benefits by exceeding maximum amount of a housewife’s annual
income (one million yen per year) that is eligible for a tax-exempt status ofhusband’s income. . . . Social systems should be neutral to the diverse types of employment for women.

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Naohiro YASHIRO

And third, various Japanese employment practices discouraging female lobor
force participation need to be changed. Enhanced day care centers will help working women continue to work. But even if the standards of these facilities are much
improved, some women will find it difficult to use them while their children are still
infants, or to take child care leave for several years. If the employment systemallows women to return to their former positions after taking child care leave, theopportunity cost of quitting their jobs to care for their children would be largely
reduced. By contrast, current employment practices consider male employees as
the mainstream workers of a company and female employees as supporting workers, for they may quit or suspend their work for child care at any time. This system
is based on the premise of long working hours, including overtime work, the frequent transfer and relocation of jobs within the firm, and conventional genderroles. The controversial question of reforming long-standing employment practices
should also be examined from the viewpoint of declining birthrate arising fromwomen’s desire to continue working while they take care of their children.
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