Review of Population and Social Policy, No. 8, 1999, 27–48

The Public Pension and the Labor Supply ofOlder Women in Japan
Nobuko NAGASE*

Abstract
This paper, while describing the revised Japanese public pension
scheme for housewives and showing the actual receipt of public pensions by
women according to occupational group, empirically estimates the effect of the
public pension on labor supply and home production activities of older women.
Data are drawn from two sets of national sample of females aged 55–69 surveyed
in 1983 and 1992, when a decline in extended families, an increase in older
couples, and a rise in the general pension level was observed. As the pension
receipt increased, a large retirement effect and an increase in housekeeping
activities was estimated for females with formal paid work experience, while aslight rise in leisure activities was estimated for housewives.

1. Introduction
Little is known about the effect of the public pension scheme on the life of older
females, whereas more empirical research is conducted on its effect on males.
There are some exceptions, such as the work of Mikami (1983) and Shimono andTachibanaki (1984), though their data were obtained before a major reform in the
public pension plan. The aim of this paper is (1) to trace the change under way
in the family life and public pension of older Japanese females and (2) toempirically estimate the effect of the pension on the work and home production
activities of this age group. The paper uses two national data sets, “Survey of theLabor Supply of the Elderly,” conducted by the Ministry of Labour in 1983 and in
1992; the surveyed population was between the ages of 55 and 69. The years
surveyed are of interest because of the implementation of public pension reforms
and because of the high speed with which the lifestyle of the Japanese elderly
was transformed. Between the two survey years, the pension reform of 1985
influenced both housewives and employees. The family picture rapidlychanged for older people in these years, with extended families increasinglyThis is the English version of a paper on a project of the Japan Institute of Labour, written by Nobuko
Nagase and Noriyuki Takayama and published in Public Pension Reform and Its Effect on
Retirement and Labor Supply Behavior: Analysis Based on a Survey of the Labor Supply of theElderly: Report I. I wish to thank the Institute; Noriyuki Takayama, chairman of the project; Yoshihiro
Kaneko; and other project members. I also am grateful to Kazumitsu Nawata for his useful comments.
* Associate Professor, Ochanomizu University[ 27 ]

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Nobuko NAGASE

replaced by nuclear families. At the same time, family work and self-employment
opportunities decreased.
Section 2 traces the change in the lives of older women, in terms of family,
work opportunities, and average pension benefits. It also explains the Japanesepublic pension scheme and how it has been reformed. Section 3 empiricallyestimates the effect of the pension on the work choices of females. It explains
the underlying model and the choice of variables, the estimation result by age
group, by household size, and the result by occupational group.
The work choice of older women should be influenced by their past work
history as well as the pension benefit, but the pension benefit is also influenced bytheir past work history. Such correlation is particularly strong for women, whose
work history is usually more diverse than men’s. Section 4, therefore, utilizes thepast work history data to focus on the market work and home production choicesof women. Included are estimates of labor participation behavior of women withand without prior work experience and of the choices among housework, work in
the job market, and leisure pursuits using a multinomial logit model.

2. Background2.1. Changes in the Family and Work Life of Older Women, 1983–1992

Table 1 demonstrates the quiet but drastic change taking place in the family life ofolder females. In the 1983 survey, more than 40% of respondents in the highest age
group of the sample (65–69) indicated that they depended mainly on theirchildren’s income. In just nine years, in the 1992 survey, that proportion declined to24%, and a comparable 40% indicated that they depended on their husband’s
income. The immense shift was partly a result of socio-cultural changes, but it wasalso pushed by the general increase in male pension receipts.1 In these years adultchildren’s contribution to their elders’ monetary needs, it might be said, transformed
from a direct transfer within the family to a national transfer through the public
pension scheme. The increase in self-dependence resulted in a higher percentage ofolder people living as couples. The lower part of Table 1 shows that in 1983 nearly
50% of females aged 65 to 69 were living in a household containing 4 or moremembers. The ratio declined to 40% in 1992 as two-member households increased.

1

Increase in monetary independence of older couples was not the result of increased labour
participation. The participation rate of older men in Japan had been on the decline throughout
the 1970’s and 1980’s, though it showed a small reversal in the late 1980s. Nevertheless, themale participation level was no higher in 1992 than in 1983.

The Public Pension and the Labor Supply of Older Women in Japan

29

Table 1 Income status and household size of older women
Age Group
55–59

60–64

65–69

1983

1992

1983

1992

1983

1992

Main Income Earner
Self
HusbandChildren

22.4%
58.3
13.0

21.1%
65.9
6.3

19.7%
44.0
27.8

20.4%
58.8
12.9

18.9%
31.0
41.5

22.6%
42.8
24.2

Household Size
1 member
2 members
3 members
4 or more members

8.7
31.7
22.0
37.6

6.3
32.9
28.3
32.5

10.8
33.4
14.1
41.8

9.2
38.7
20.1
32.1

13.8
25.8
11.5
48.9

13.6
34.3
12.7
39.5

Note: Those who replied “Others” are excluded from the main income earner category, so the numbers
do not add up to 100%.

Older citizens might also be said to be more self-dependent in terms of health.
For example, the female portion of those aged 60–64 who considered themselves
to be “in good health” increased from 57% in 1983 to 64% in 1992. Improvement
in health condition was seen in every age group.
The labor participation rate of females showed little change over time; those in
the 55–59 age group increased slightly from 53% to 56%, while leveling off for the
60–64 and 65–69 age groups at around 40% and 30% respectively. But during thenine years the type of work changed. Family workers, the self-employed, andother informal workers were on the decline while paid employees increased. The
latter rose by about 10 percentage points in the 55–59 age group and 5 percentage
points in the 60–69 age group.
2.2. The General Public Pension Scheme and Major Reform Concerning Women

Two pillars of the Japanese public pension scheme are those for paid employees
and those for the rest of the population. For the former, the contribution andbenefits are earnings based, whereas for the latter there is a flat tax and flat
benefit structure. Among the earnings-related pensions are Kosei pensions for
employees of private firms and Kyosai pensions for employees primarily in the
public sector. The flat tax type is called the Kokumin (the People’s) or the Basic
pension. I will use these terms throughout this paper, though the names and theunderlying concepts were changed somewhat after the 1985 reform. The
Kokumin pension covers informal sector workers and housewives. The averagepension of paid employees is more than twice as high as it is for the Kokumin
pension group.

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Nobuko NAGASE

The most important pension reform of 1985 for females might be that relating
to housewives. Before 1985, nonworking wives of paid employees were notsubject to mandatory coverage, since Kosei and Kyosai pension values entitled tobreadwinners were designed to support both the breadwinners and their wives.
The Pension Reform Act of 1985 required that all citizens aged 20 to 59, including
housewives, be compulsory members, but that nonworking wives be exemptedfrom the social security tax if their husbands were earnings-related public pension
plan members. The idea of the reform was to gradually transfer a certain
proportion of the pension rights of the breadwinners to their wives, while keeping
the pension benefits and contribution for a household the same. Such reform isreflected in the surveyed sample. For the 1992 sample, the wives of paid
employees who were 65–66 years of age at the time of the survey, obtained
pension rights through this reform even if they had never been voluntary
participants in the public pension plan, though the entitled pension amount was
yet low.
Another change under way during the survey years was the equalization of thepension eligibility age between the sexes. Formerly, Kosei provided old-age
pensions for females 55 years and older but for males 60 years and older.2 The
eligibility age of females was gradually headed to the male level during theperiod of the two surveys. Therefore, the age qualification for Kosei rose from 55
in the 1983 sample, to 57 in the 1992 sample.
2.3. Types of Pensions and Group Characteristics

Table 2 shows the composition of pension types for females aged 65 to 69.3
More than 50% of females received only Kokumin, the flat tax public pension forthe self-employed and housewives. Almost 33% percent received some Kosei, thepension for paid employees at private firms, up from under 24% in 1983 as aresult of the increased number of women with paid work experience. The group
receiving no public pension decreased from 16.7% to 11.6%, partly reflecting the1985 Reform. Though the data are not shown in the table, the number ofrecipients of public pensions in their late fifties also declined, reflecting thereform in age qualification.
When Table 2 was compared to the counterpart for males (table not shown), thepercentage of earnings-related female pension recipients—e.g., Kosei—is much2

3This was partly a reflection of the difference among many firms in the mandatory retirement
age for men and women. However, such labor practice became illegal when the Supreme
Court ruled that they were violating the equality-of-sex provision of the Constitution.
The age group 65–69 was selected since the standard qualification age for Kokumin is 65.

The Public Pension and the Labor Supply of Older Women in Japan

31

Table 2 Monthly public pension receipts of women aged (65–69), by pension group
1992

1983

Composition

Average
Receipts(10,000 yen)

Composition

Average
Receipts(10,000 yen)

Kokumin only

51.3%

3.73

55.3%

2.42

Kosei only

21.7

9.13

13.3

5.96

Kyosai only

3.8

17.11

3.7

10.79

Kokumin and Kosei

9.0

8.76

8.6

5.85

Kokumin and Kyosai

2.0

12.22

1.8

9.73

Kosei and Kyosai

1.6

15.17

1.2

12.06

Kokumin, Kyosai, Kosei

0.6

13.53

0.4

13.31

Receiving no public pension

11.6

—

16.7

—

Pension Group

Note: Kosei and Kyosai are earnings-related pensions, the former the pension for employees of private firms
and the latter primarily for public servants. Kokumin is a flat tax pension for the remaining population.
The age group 65–69 was surveyed, as age 65 is the standard eligibility age for Kokumin.

lower than that of males4. The average pension value of this group was also
about half the value of their male counterparts’. More women than men received
a pension from more than one pension group, due to their intermittent work
experience. The Kokumin receivers constituted a higher percentage of females
because housewives were included in the category, and the average benefit was
rather low. Among the various public pension recipients, the “Kyosai (public
sector) only” group received the highest average pension—170,000 yen permonth—about twice as high as “Kosei (private sector) only” group. The
difference arises partly because of the smaller male-female wage gap in the
public sector and partly because of the longer average tenure of females in the
public sector.5
2.4. Main Activities of Older Women by Household Size

As shown in Table 3, the main activities of older women are strongly related tohousehold size. About 65% of females aged 55–59 living alone reported that theirmain activity was paid work outside the home, whereas the percentage wasmuch lower for those who lived with family. The “mainly working” portion of

4

5

The minimum qualification for Kosei retirement pensions was a 20-year membership—15 years
under certain conditions—for the sample.
Examples of Kyosai group members are teachers and nurses employed by the public sector.

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Nobuko NAGASE

Table 3 Main activities of older women by household size (1992 sample)
Household Size
Main Activity

Employee
Homemaker
Volunteer
Hobbies (alone)
Hobbies (group)
Other

1 Member

2 Members

3 or More Members

Age Group

Age Group

Age Group

55–59

60–64

65–69

55–59

60–64

65–69

55–59

60–64

65–69

65.1%
20.6
1.6
3.9
2.0
6.8

42.1%
35.9
4.1
7.4
2.5
8.1

25.7%
52.0
3.4
5.5
4.3
9.2

38.7%
54.2
1.0
1.7
1.4
3.0

23.2%
68.1
1.5
2.1
1.1
4.1

15.9%
73.2
1.5
2.7
1.2
5.4

41.1%
52.2
0.9
1.4
0.7
4.0

26.8%
61.5
1.3
2.2
1.5
6.7

20.0%
60.7
1.2
4.9
1.4
12.1

Note: The Ministry of Labour survey asked whether the respondent worked on a regular basis and, if
so, whether in primary or secondary activities. Those who said they did not work at all or did
so as a secondary activity were asked to indicate whether their main activity was doinghousehold chores, volunteer work in the community, hobbies alone or in a group, or other.

the population declined with age in each household size, whereas the “mainly
homemaking” portion increased. In two-member households, many females
remained the dominant housekeeper even in their late sixties, whereas for threeor-more-member households, a part of the decline in “mainly working” was filled
by active and passive leisure activities. Such differences may reflect family
composition: whether one is living in an extended family with married children
or in a nuclear family with children not yet married, or whether one is living witha spouse or is widowed. Unfortunately, due to data composition the information
can only be inferred from the household size.
The difference in the value of public pensions was also notable by household
size. Female singles indicated a higher percentage of Kosei receipts: in 1992: 29%
in the 55–59 age group received Kosei, whereas only 9% did so in two-member
households. More single women seemed to have formal work with mandatory
retirement and retirement pensions, though the receipts could also be thesurviving wife’s benefit if her husband was deceased. More women received
Kokumin in larger households, not only because more women were full-timehousewives in these households but also because a family-business workers (alsooften the Kokumin recipient) lived in a larger household. Sixty-nine percent offemales in three-or-more-member households in the 65–69 age group received
Kokumin compared to 47% in a single household in the comparable age group.

The Public Pension and the Labor Supply of Older Women in Japan33

3. The Female Labor Supply and the Effect of
the Public Pension Scheme
3.1. The Labor Supply Model and Explanatory Variables

The estimation procedure outlined here follows the usual framework of astandard labor supply model. One maximizes utility derived from goods andleisure consumption. In doing so, one compares one’s reservation wage and themarket wage when deciding whether to retire or to participate in labor. Age andhealth are important factors affecting reservation wage of older people, alongwith pension benefits and other family income. Family size also influences thehousehold’s demand for home production. In fact, women in their fifties andsixties generally face dynamic changes in the family: retirement (themselves andtheir spouses), marriage of children, nursing of parents, and the decision to livewith or away from their children. Because such information is unknown, I have
tried to control such factors by household size.
The reduced form labor supply model is expressed as
LP = F (wage, age, health, pension receipts, other family income;household size)
LP = 1 if labor participant
LP = 0 if nonlabor participant
The model is applied to the total female population by age group to accountfor difference in life stage, and then by the household size to obtain a general
picture (shown in section 3.2).
This procedure, however, is not adequate in capturing the true effect of public
pension scheme on the retirement decision, because the pension scheme and theaverage benefit as well as the occupation are different between Kyosai, Kosei and
Kokumin groups as explained. As the third estimation, therefore, separate
estimates for Kosei and Kyosai pension-entitled groups and Kokumin pensionentitled groups were made (see section 3.3).
As a fourth trial (see section 4.1) the model was applied only to those who
retrospectively replied that they were paid employees at age 55. This was toconfirm whether the strong retirement effect obtained for Kosei and Kyosai groups
in the previous section was a real one, not a seeming result obtained by the low
participation rate of housewives who get the benefit through the surviving wives’
benefit and not by one’s own work experience. The work history and pension
entitlement is also detailed in this section.
Lastly, considering the fact that a large portion of women do not participate in

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Nobuko NAGASE

the workforce but are working as homemakers, I conducted a multiple logit
analysis of choice among home production, workforce participation and leisurepursuits to see the effect of public pension values on the choice of activities
including home production activities (see section 4.3).
Regarding the explanatory variables, Shimono and Tachibanaki (1984) foundthat elasticity of the female labor supply differs greatly depending on theclassification of the main wage earner. However, since the main wage earner may
be the result rather than the cause of the labor supply, I will use this classification
only when the “other family income” variable was unavailable. The actual wage
data—income divided by estimated monthly work hours—were used as a wage
rate variable for workers; for nonworkers, the prefecture part-time wage rate ofsmall firms was used, the latter the most probable work opportunity for new
entrants to the labor market. The explanatory variables are itemized in Table 4.
The estimation was conducted for 1992 samples and, in some cases, for the

Table 4 Explanatory variables for the 1983 and 1992 surveys
Pension value

The total amount received from Kokumin, Kosei, Kyosai,
and smaller private pensions. (The private pension amountis quite small and is included unless otherwise specified.)1983 pension value price adjusted for the case of thepooled data.

Entitlement to public pensions
Kosei
Kyosai
Kokumin

For 1983 sample only:
A dummy variable
A dummy variable
A dummy variable

Age

Age when the survey was conducted

Other family income

For 1992 sample only:
Income of the household minus the female’s income

Main income earner
Self
HusbandChildren
Health condition
Health 1
Health 2
Wage rate

A dummy variable
A dummy variable
A dummy variable
The base is “others”
Good (a dummy variable)
Not good (a dummy variable)
The base is “Bad or Ill”
For workers, monthly wages were divided by averagemonthly work hours estimated from daily work hours andweekly workdays on a usual basis. For nonworkers, theprefecture average of part-time wage rates of small
enterprises (10–99 workers) was assigned using the
Ministry of Labour’s Chingin Census.

The Public Pension and the Labor Supply of Older Women in Japan35

pooled data of 1983 and 1992. For some estimates, the relevant variable wasavailable only for 1983 and therefore only 1983 data were used.
3.2. Labor Supply Estimation Results by Age Group and Household Size

Table 5 presents the results of probit analysis of the labor supply by age groups
55–59, 60–64, and 65–69. The numbers in the table show the change in theprobability of labor participation for the marginal change in each independent
variable evaluated at the means of the independent variable. For dummy
variables, the results demonstrate the discrete change in probability when the
dummy variables change from 0 to 1. The data in parenthesis are the t-value.
Good health increased labor participation by nearly 40% compared to badhealth. Aging reduced participation by nearly 4% in the younger group and by
1% in the older groups. An increase in the income or pension value of otherfamily members also significantly reduced labor participation. For example, a
10,000 yen increase in pension decreased the labor participation rate of the
55–59 age group by 2.1% but 0.5% for the 65–69 age group. The explanatory
power of the model declined in the higher age group. This result is qualitatively
similar to that of Shimono and Tachibanaki (1984). In their estimation as well as
in mine, the marginal effect of pension value, other family income, and healthcondition is higher for the younger female age group, whereas the effect of suchvariables in their study shows that for males the effect is greater for the higher
age group. They conclude that such differences can be explained by the fact that
men tend to be core income earners whereas women are additional or secondary
income earners. My results confirm that the basic structure and factors affecting
female labor participation have not changed over the decade despite theTable 5 Empirical result of the labor supply of older women,
by age group (1992 sample)
Age GroupAll
Pension value
Age
Health 1
Health 2
Wage rate
Other family income
Constant

Sample size
Psuedo adj r2

55–59

60–64

–0.0140 (12.51) –0.02050 (7.938) –0.01450 (8.659)–0.0171 (13.19) –0.03710 (6.092) –0.01400 (2.410)
0.4081 (24.11)
0.43330 (13.05) 0.36160 (13.24)
0.2503 (12.72)
0.25270 (7.129) 0.22340 (6.754)
0.0000 (0.770)
0.00014 (7.258) 0.00010 (6.302)–0.0053 (21.73) –0.00701 (16.65) –0.00589 (13.96)
2.0711 (8.844)
4.87130 (4.907) 1.55140 (1.621)

11,2200.10593,851
0.1226

3,842
0.086865–69–0.00530 (3.079)–0.01370 (2.256)
0.35480 (12.79)
0.21050 (6.321)
0.00008 (5.459)–0.00371 (8.279)
1.53260 (1.295)

2,952
0.0884

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Nobuko NAGASE

extensive shift in the family picture. The stronger negative influence of aging in
the 55–59 age group, which was not evident in Shimono and Tachibanaki’s
estimation, may be the result of the change in eligibility age of the public
pension for female employees.
Table 6 shows a different estimation result by household size. The explanatory
power of the model improved for one-member and two-member households. For
older women in one-member households, pension value, health, other family
income, age, and wage rate explain 24% of the variation in labor participation
choice. Because the demand for housekeeping is small in the smaller household,the bilateral choice model of work and nonwork seems to illustrate the actual
choice better than in the case of larger households. The discouraging effect ofpension on labor participation is largest for single-member households. A 10,000

Table 6 Empirical result of the labor supply of older women, by household size(1) 1992 Data
Household Size
Pension value
Age
Health 1
Health 2
Wage rate
Other family income
Constant
Sample size
Pseudo adj r2

1 Member

2 Members

3 or More Members–0.0288 (9.438)–0.0184 (4.026)
0.6416 (10.89)
0.4500 (7.496)
0.0002 (4.791)–0.0139 (4.694)
1.6736 (2.244)–0.0122 (6.628)–0.0212 (9.550)
0.3773 (13.93)
0.2283 (7.089)
0.0001 (6.381)–0.0087 (16.41)
2.7031 (7.328)–0.0138 (8.148)–0.0147 (8.489)
0.3924 (16.51)
0.2258 (8.251)–0.0001 (6.709)–0.0052 (14.65)
1.7729 (6.343)

1,027
0.2366

4,026
0.12456,126
0.0961(2) Pooled Data for 1983 and 1992
Household Size
1992 dummy
Pension value
Age
Health 1
Health 2
Wage rate
Main income earner
Self
HusbandChildrenConstant
Sample size
Pseudo adj r2

1 Member

2 Members

3 or More Members

0.02650 (0.99)–0.04650 (16.2)–0.01820 (5.65)
0.59460 (14.7)
0.40790 (9.34)
0.00028 (6.69)

0.04910 (4.01)–0.03030 (16.5)–0.01620 (10.1)
0.34250 (17.4)
0.23380 (10.1)
0.00011 (7.47)

0.07230 (7.79)–0.02820 (18.6)–0.01390 (11.5)
0.37150 (24.0)
0.25730 (14.0)
0.00007 (7.01)

0.58420 (18.4)
0.04460 (0.57)
0.00490 (0.07)
0.44920 (0.87)

0.50510 (19.0)–0.08050 (3.33)–0.04200 (1.33)
1.36440 (5.04)

0.43280 (18.8)–0.10540 (5.28)–0.12670 (6.21)
1.16890 (5.80)

2,474
0.41808,177
0.2262

13,8620.1912

The Public Pension and the Labor Supply of Older Women in Japan37

yen increase in one’s own pension decreased the labor supply of one-member
households by 2.9%, whereas the proportion was 1.2% for two-member households.
When calculated at the mean, one percentage change in pension decreased
participation by 18.7% for one-member households, 3.7% for two-member
households, and 3.9% for three-or-more-member households. Such a large
decline is estimated for single-member households because the average pension
level as well as the estimated coefficient is large. A 100 yen increase in wages, on
the other hand, would increase the participation of single households by 2% andtwo-member households by 1%, but it would reduce the participation of three-ormore-member households. Although I imputed a part-time wage for nonworkers
in the estimate, the wage of family workers is known to be lower than that of theaverage part-time paid employees (Nagase [1997]), and the negative coefficient
may reflect the fact that more women engaged in family business in larger
families. The positive effect of good health on labor participation was also higher
for single-member households.
The lower part of Table 6 shows the estimation result of pooled data for 1983
and 1992. Because the other family income variable was unavailable for the 1983
sample, main income earner dummies were used. The estimated discouragement
effect of pensions was higher when main income earner dummies instead of theother family income variable were used, but no structural change of coefficient
was evident for pension values over the two years. The dummy for 1992,
however, was positive and significant.6 Labor participation rose by 5% in twomember households and 7% in three-or-more-member households in theeconomic boom of the early 1990’s, not explicable by the change in otherindependent variables in 1992.
3.3. Labor Participation and the Effect of the Various Pension Groups: Kosei
and Kyosai (Earnings-related), Kokumin (Flat Benefit Pension)

Whereas section 3.1 shows the overall picture of the labor supply decision of thefemale elderly in Japan, this section describes the differences among pension
groups to eliminate the seeming effects that may be produced by differences in
the average pension level and differences in work history. The reason is asfollows. The average Kokumin pension is much lower than Kosei and Kyosai
pensions (Table 2). The entitlement to a different pension also reflects past work
history, which strongly influences the labor participation decision as well.
Kokumin, for example, consists of divergent groups of individuals: the self-

6

The 1992 dummy was not significant for one-member households, though the actual participation rateincreased. The increase is mostly explained by the increase in the main income earner-self dummy.

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Nobuko NAGASE

employed, family workers, full-time housewives, and paid employees who work
only part-time. The self-employed and family workers are known for lateretirement. On the other hand, Kokumin also includes housewives who may
have little work experience and low participation in the labor force regardless ofthe pension benefit. The Kokumin group, therefore, is a mixture of individuals
with high and low labor attachment and a low average pension amount. On theother hand, Kyosai and Kosei cover workers with longer formal paid work
experience and entitlement to a higher pension value. Evaluating these different
groups with different work characteristics together may not reveal the true effectof pension benefits on their labor supply decisions.
First, pension entitlement based on type of pension was used as an independent
variable of the labor participation decision. Seike (1989) recommended“entitlement,” not the “actual receipt,” on the ground that this variable escaped the
problem of negative institutional correlation between labor participation andreceipt of the Kosei pension7. Though such negative correlation is considered to beless serious for women—because their earnings level on average are lower, andmoreover, many women take part-time jobs, most of which are not covered by
the institutional rule—I made the estimation using the recommended variable for1983 but not for 1992, as the variable was unavailable for the 1992 sample.
The results in Table 7 show that entitlement to earnings-based public pensions
strongly discourages female participation in the workforce. Kosei and Kyosai
entitlement reduced labor participation by 22–29% for the 55–59 age group,
9–26% for the 60–64 age group, and 4–13% for the 65–69 age group compared toindividuals who received no pension. On the other hand, those who are entitledto the Kokumin pension—that is, the self-employed and a portion of housewives—interestingly have a higher labor participation rate compared to the no-pension
group, perhaps because the no-pension group consists mainly of housewives
while the former has more informal workers.
Since a large difference was observed among groups, I again made a separate
labor supply estimation by pension group using the pension value, and not theentitlement as an explanatory variable (see Table 8). The estimated result, however,
was fairly similar to those estimated altogether among the total population when
the same variable (main income earner as the family income variable, e.g., as in
Table 6) was used. The magnitude of the effect of a 10,000 yen increase inpension receipts is again largest for the 55–59 age group, lowering female labor
participation by 4–5% for women with paid workforce experience.
7

Since earnings-related pension benefits are conditional on earnings level subject to an earnings
test up to age 65, if a person is still employed and his or her wages are high, the pension
benefit is reduced or halted. If actual pension receipt were used, Seike observed, the negative
correlation between pension value and labor supply would be overestimated.

The Public Pension and the Labor Supply of Older Women in Japan

39

Table 7 Empirical results of the labor supply of older women,
by entitlement to pension plans (1983 sample)
Age Group
Kosei dummy
Kyosai dummy
Kokumin dummy
AgeHealth 1
Health 2
Wage rate
Main income earner
Self
HusbandChildrenConstant
Sample size
Pseudo adj r2

55–59

60–64

65–69

–0.216000 (8.04)–0.292500 (7.37)—–0.018900 (3.32)
0.452800 (16.4)
0.317700 (10.5)
0.000121 (5.61)–0.085000 (4.30)–0.255700 (8.77)
0.068200 (3.95)–0.021400 (3.76)
0.389100 (15.3)
0.313100 (10.3)
0.000078 (4.30)–0.0399000 (2.16)–0.1337000 (4.97)
0.0827000 (4.97)–0.0095000 (1.88)
0.3141000 (13.6)
0.2147000 (7.90)
0.0000695 (4.07)

0.523700 (16.8)–0.059600 (1.86)–0.083000 (1.66)
1.364100 (1.66)

0.551800 (15.9)
0.039200 (1.25)
0.013800 (0.42)
1.883000 (1.93)

0.3752000 (10.7)–0.0114000 (0.40)–0.0447100 (1.61)
0.2795000 (0.23)

5,260
0.23394,392
0.20393,613
0.1877The discouraging effect of public pension entitlement on labor supply,
especially for paid employment groups, is greater than that estimated for men inprevious studies. However, this may be an overestimation, since some Kosei
recipients could be receiving a surviving wife benefit and may have neverparticipated in the workforce. In fact, women’s experience in the labor market is
not uniform. Some have worked most of their lives, some have never worked,
and some have entered and left it frequently. Comparing the labor behavior of
persons with different work histories can be misleading. Therefore, the next
section focuses on those who indicated that they were paid employees at age 55.

4. The Retirement Behavior of Women with and without Paid
Work Experience: Their Home Production
Activities and Market Work4.1. Analysis of Paid Employees

The survey questionnaire asked whether respondents had been paid employees
at age 55, and the answer seems to work as a good proxy for females with morepaid work experience and with little or no work experience. As shown in Table
9, about 30–40% of the women in the 1983 sample were paid employees at age
55, then the dominant mandatory retirement age in Japan. In fact, the labor
participation rate of the group with paid work experience was 63%, whereas that

40

Nobuko NAGASEof the rest was 14% in the 55–59 age group, as indicated in the second and thirdcolumns of Table 9. Interestingly, however, of those who were paid employees atage 55, only 16% had a Kosei entitlement (public pension for paid employees) atages 55–59. Coverage increases with age, and in the age group 65–69, the Koseientitled population increased to 43% of women with work experience at age 55.
On the other hand, of those who were not paid employees at age 55, 71% were
Kokumin entitled at ages 65–69. Also, of those with work experience but lacking
a Kosei entitlement, 69% acquired a Kokumin entitlement at ages 65–69. Thirty
percent of paid employees had both Kosei and Kokumin entitlements.

Table 8 Empirical results of the labor supply of older women,by type of pension plan (1983 sample)(1) Kosei and Kyosai (paid employees)
Age Group
Pension value
Age
Health 1
Health 2
Wage rate
Main income earner
Self
HusbandChildrenConstant
Sample size
Pseudo adj r2

55–59

60–64

65–69

–0.046800 (9.95)
0.006200 (0.38)
0.472700 (5.50)
0.347800 (3.42)
0.000328 (3.92)–0.041000 (9.78)–0.014300 (1.30)
0.309600 (5.60)
0.241300 (3.63)
0.000151 (7.11)–0.025400 (6.39)–0.023700 (2.22)
0.308500 (6.43)
0.214600 (3.54)
0.000307 (5.41)

0.414000 (5.98)–0.024200 (0.33)–0.182300 (2.19)
2.279400 (0.89)

0.434800 (7.14)
0.066700 (1.05)–0.010700 (0.17)
1.283000 (0.67)

0.180800 (3.42)–0.041600 (0.74)–0.117900 (2.34)
3.584100 (1.54)689
0.34261,100
0.2210986
0.2050(2) Kokumin GroupAge Group
Pension value
Age
Health 1
Health 2
Wage rate
Main income earner
Self
HusbandChildrenConstant
Sample size
Pseudo adj r2

60–64

65–69

–0.032000 (2.96)–0.033700 (3.30)
0.412100 (9.94)
0.316900 (6.63)–0.000589 (2.14)–0.022700 (13.3)–0.006400 (4.52)
0.397200 (8.20)
0.220300 (4.76)–0.000013 (8.26)

0.605400 (9.54)
0.025200 (0.46)–0.064900 (1.18)
4.564600 (2.65)

0.599800 (5.93)–0.042800 (1.57)–0.007600 (2.32)
1.225000 (1.93)

1,500
0.21642,540
0.2135

The Public Pension and the Labor Supply of Older Women in Japan

41

Table 9 Work history and pension entitlement (1983 sample)
Age
Group

% of Paid
Employees
at Age 55

55–59
60–64
65–69

37.5%
36.1
30.4

Present Participation Rate

Kosei Entitlement

Paid
Employee
at Age 55

Othersat Age 55

Paid
Employee
at Age 55

Othersat Age 55

KoseiEntitled
Population

62.6%
59.1
49.1

14.2%
23.5
24.2

16.1%
36.9
43.3

5.8%
10.9
12.6

9.6%
20.3
21.9

Kokumin Entitlement
Age
Group

60–64
65–69

Othersat Age 55
44.3%
71.0

Paid Employee at Age 55

28.1%
57.5

Kosei
Entitlement

No Kosei
Entitlement

6.8%
31.8

26.3%
68.9

KokuminEntitled
Population
38.2%
66.9

This rather complicated picture shows that the Kosei entitled population was
about half of the women who had paid work at age 55. Because private firms
need not offer a Kosei pension benefit to part-time employees and workers
employed on temporary basis, the remaining half did not have a Kosei
entitlement, though they did some market work at firms. Seventy percent of themvoluntarily participated in the flat tax Kokumin pension. On the other hand,about 10% of those who were not paid employees at age 55 nevertheless had a
Kosei entitlement—perhaps the surviving wife’s benefit. The average value of
Kokumin pension receipts was around 20,000 yen for both nonworking females
and working females, which was less than half of the full flat benefit.8 They weremuch lower than Kosei receipts.
Figure 1 shows the relationship between labor participation and public pension
entitlement of females who worked as paid employees at age 55. The labor
participation rate is about 20% lower for the Kosei and Kyosai entitled groups thanfor the no-pension group. From age 60, the Kokumin benefit is available. Again,
the labor participation rate is somewhat lower for the Kokumin entitled groupthan for those who have no pension.
When probit analysis of the labor participation choice was conducted for thelimited sample (1983) of women with paid employment experience, as shown in

8

The full benefit of the Kokumin pension is reduced when the years of enrollment are shorter
than what they could have been, or when the individual starts early receipt of the benefit
before the standard age of 65.

42

Nobuko NAGASE

(%)
100

Labor participation rate

90
80

With Kosei or Kyosai entitlement

70
60
With Kokumin entitlement

50
40
30

No public pension entitlement

20
10
0

55

57

59

61

63

65

67

69 (Age)

Note: Kokumin entitlement starts at age 60. The volatile labor participation
rate of those with no public pension entitlement is due to the fact thatthe sample size decreased to 30 respondents after age 65.

Figure 1 Pension entitlement and the labor participation rate
for women who were paid employees at age 55(1983 sample)

Table 10, the discouragement effect of Kosei and Kyosai entitlement demonstrated
an even higher magnitude—about 30%. The magnitude was twice the estimate formen (Seike [1989]).9
Though Kokumin provides full benefits from age 65, early benefits can begin atage 60, though at a penalty—the lifetime decline in the benefit can be as high as
42%. For the 1983 sample, the entitlement (including right to the early benefit) canbe specified, whereas for the 1992 sample, only the actual receipt (but not theright) was obtained. Therefore, the meaning of “entitlement” differs for the two
samples. The estimated results show that Kokumin dummy for ages 60–64 is
insignificant for 1983 but significantly negative for 1992. The difference can beinterpreted as the actual receipt but not the entitlement relates to retirement.
4.2. Analysis of Housewives and Informal Sector Participants

Now let us turn to the work behavior of nonpaid employees who are mostly
housewives and some informal sector participants. In 1983 50% of nonpaid
employees aged 60–64 and 70% of those aged 65–69 had a Kokumin entitlement.

9

Seike estimated that the Kosei entitlement reduces the labor participation of men in the agegroup 60–64 by 15%.

0.153616 (6.917)
0.027122 (1.218)–0.065860 (1.682)
7.181990 (4.048)

0.21704 (7.233)
0.02705 (0.912)–0.08777 (2.135)
6.17782 (3.823)

0.80361,970
0.2618Labor participation rate
Sample size
Pseudo adj r2

0.86781,914
0.2323–0.018260 (4.088)
0.171190 (4.320)
0.054210 (2.206)
0.000040 (2.645)–0.269090 (9.174)–0.435800 (7.960)–0.02496 (4.288)
0.33546 (8.346)
0.15752 (6.984)
0.00011 (4.303)–0.30518 (11.39)–0.33339 (7.148)

1992

Age
Health 1
Health 2
Wage rate
Kosei dummy
Kyosai dummy
Kokumin dummy
Main income earner
Self
HusbandChildrenConstant

1983

55–59

0.57781,587
0.24380.48555 (9.906)
0.18398 (3.554)
0.03067 (0.547)
3.44204 (2.149)–0.02969 (2.980)
0.45703 (8.897)
0.32116 (6.421)
0.00014 (3.769)–0.28125 (9.131)–0.52539 (10.67)
0.01270 (0.379)

1983

1992

0.61191,5460.21050.318204 (6.405)
0.077299 (1.497)
0.028295 (0.450)
3.060404 (1.857)–0.020340 (2.068)
0.286499 (5.214)
0.164246 (3.045)
0.000088 (3.021)–0.363830 (12.21)–0.581300 (12.18)–0.164900 (3.245)

60–64

Age Group0.40127
1,099
0.19820.30561 (5.119)
0.02567 (0.411)–0.13841 (2.355)
0.94475 (0.464)–0.01360 (1.170)
0.41023 (8.261)
0.32414 (5.578)
0.00019 (3.837)–0.16928 (4.696)–0.29082 (5.443)
0.04261 (1.162)

1983

1992

0.4430129
1,009
0.15920.333747 (5.362)
0.082219 (1.261)
0.015788 (0.217)
3.259780 (1.550)–0.028113 (2.269)
0.399772 (7.313)
0.193113 (3.076)
0.000117 (3.531)–0.132071 (3.325)–0.244898 (4.252)
0.134895 (3.380)

65–69

Table 10 Empirical results of the labor supply of older women, by work history: Paid employees at age 55

The Public Pension and the Labor Supply of Older Women in Japan43

44

Nobuko NAGASE(%)
40

Labor participation rate

Kokumin entitlement,
1983

35
30

No public pension entitlement,
1983

25
20

Kokumin pension
receipt, 1992

15
10

No public pension
receipt, 1992

5
0

55

57

59

61

63

65

67

69 (Age)

Figure 2 Pension entitlement and the labor participation rate
for women who were paid employees at age 55

As depicted in Figure 2, the labor participation rate was higher for Kokuminentitled groups than for “no public pension” groups. The latter must havecontained more housewives and the former more self-employed and family
workers. In Figure 2, I also added pension receipt and work behavior using 1992
data to compare the result with that of the 1983 sample. The average
participation level for 1992 was higher than for 1983. Moreover, for Kokumingroups, the age-labor participation profile of the 1992 sample was inversely Ushaped, whereas the 1983 sample showed a monotonic decline. The difference isinteresting. According to Figure 2, those receiving the Kokumin benefit before
the standard age of 65 at the risk of a large reduction in total pension amount
were those who retired early, compared with those who had the entitlement but
waited until age 65. The causality direction between retirement and early pension
receipt, however, needs more scrutiny.
4.3. Choices between Home Production, Leisure and Workforce Activities

For many women, housekeeping and nursing are important activities outside theworkplace. Many case studies show that the older female spouse acts as the main
force in the nursing of her aged husband. The bilateral choice model of work andleisure will not illustrate the actual choice of such female activities. Following the
Granou (1977) model of choice between work, home production, and leisure, I
conducted multilogit analyses of the market work, home production and leisureactivity choices of older women. I divided leisure activities into active leisure

The Public Pension and the Labor Supply of Older Women in Japan45

activities and passive leisure activities, since “resting”—which may well occur when
one is in poor health—may be a distinctly different activity choice for the aged
than engaging in hobbies or volunteer work. Wage rate, pension value, conditionof health, age, household size, income of other family members, and nonlabor
income were the explanatory variables. The results are shown in Table 11.
Section 2 of Table 11 shows the results for housewives and informal sector
workers. An increase in the pension value reduced the labor supply andincreased active leisure activities. The effect of pensions resembled that of otherfamily income, but the estimated coefficient was larger. Good health increased

Table 11 Older women’s choice of work, home production,
and active and passive leisure activities(1) Paid employees at age 55

Wage ratePension value
Health 1
Health 2
AgeOther income
Other family income
1 member household
2 member household
Constant

Mainly Paid
Employment

Mainly Active
Leisure Activities

Mainly Passive
Leisure Activities–0.00004 (0.890)–0.12177 (14.40)
1.75029 (9.477)
0.85083 (4.384)–0.12202 (11.51)–0.02405 (9.863)–0.02190 (2.361)
0.43864 (2.982)–0.29958 (3.354)
7.50778 (11.00)

0.00019 (2.575)
0.00915 (0.429)
1.36004 (1.850)
0.47667 (0.603)
0.00030 (0.008)–0.01778 (1.642)–0.05185 (0.783)
1.18712 (2.443)
0.03800 (0.099)–4.62947 (1.765)

0.00001 (0.099)–0.02754 (1.879)–1.07535 (5.191)–1.02514 (4.477)
0.02262 (1.032)–0.01080 (2.047)–0.00184 (0.151)
0.00903 (0.031)–0.68240 (3.406)–2.06919 (1.464)

Sample size
Pseudo adj r2

3,956
0.16120(2) Not paid employees at age 55

Wage ratePension value
Health 1
Health 2
AgeOther income
Other family income
1 member household
2 member household
Constant
Sample size
Pseudo adj r2

Mainly Paid
Employment

Mainly Active
Leisure Activities

Mainly Passive
Leisure Activities

0.00008 (2.165)–0.04447 (4.347)
1.69212 (10.74)
0.73941 (4.325)–0.01592 (1.734)–0.02847 (13.28)–0.00030 (0.037)
0.16687 (1.136)–0.68242 (8.324)–0.65296 (1.101)

0.00019 (2.528)
0.05450 (2.845)
1.31412 (2.809)
0.65549 (1.296)
0.02343 (0.880)
0.01139 (1.989)
0.02030 (1.910)
1.46390 (3.642)
0.20606 (0.853)–7.32122 (4.148)

0.00001 (0.156)
0.01667 (1.339)–1.67553 (13.84)–1.46201 (10.84)
0.06408 (4.772)–0.00970 (3.202)–0.01227 (0.781)–0.04148 (0.196)–0.86567 (6.723)–4.67767 (5.423)

6,245
0.09570

Note: The base category is mainly homemaking. Active leisure activities include hobbies (pursued alone
or in a group) and volunteer work. Passive leisure activities include all others.

46

Nobuko NAGASE

Table 12 Simulation of main activities chosen whenhousewives’ pension level is increased
Not Paid Employees at Age 55
Main Activities

Paid Employees at Age 55

Transfer to Housewives
40,000 yen 70,000 yen

Home Production
Paid Work
Active Leisure
Passive Leisure

73.9%
17.4
1.6
7.0

73.9%
16.6
1.8
7.7

73.6%
15.4
2.3
8.7

41.0%
53.1
1.3
4.6

46.5%
47.1
1.6
4.8

Note: Predictions were made using the coefficient and variables in Table 11. The simulated result was
the average predicted outcome of the population obtained by transferring other household income
to the woman’s pension, while keeping the household income and other variables the same.

work and active leisure activities, whereas aging increased passive leisureactivities. Active leisure activities rose in single-member households, whereas
home production activities rose in two-member households.
Section 1 of Table 11 shows the results for women with paid work experience.
An increase in pension value discouraged the labor supply by a larger degree
and increased homemaking activities, whereas an increase in other family
income strongly increased homemaking activities—not leisure activities—for thisgroup. Aging strongly encouraged retirement. An increase in the wage rateincreased active leisure activities.
The results show that the choice between paid employment, home production,and leisure activities was substantially different between the two groups.
Table 12 depicts the simulated impact of transferring other family income to thewife’s pension value, in order to estimate the eventual outcome of the 1985 Reform.
I made two simulations: the transfer of 40,000 yen and the transfer of 70,000 yen,
the latter a little over the present full benefit of Kokumin. For housewives, theeventual outcome is small—but they will marginally increase leisure activities andreduce market work. The 40,000 yen transfer is also simulated for paid workers on
the assumption that the woman remained a housewife for two-thirds of her
mandatory pension enrollment years. Because paid employment is more reactive topensions, the simulated effect is larger. The mainly employed portion was simulated
to be reduced by 6% with an increase in the mainly homemaking portion.

5. Conclusion
This study has traced the activity choices of older Japanese women using the1983 and 1992 sample of females aged 55–69. The family picture of the older

The Public Pension and the Labor Supply of Older Women in Japan47

population rapidly changed during the nine-year period: two-member
households increased, extended families decreased, and households’ averagepension receipt increased. The basic factors affecting the female labor choice,however, did not change; many women worked as supplementary labor and notas the core labor of the household. The labor participation rate of females in the
55–59 age group rose in 1992 more than what is explicable by the change in thereal wage rate, health, and pension levels.
The estimation shows that the females’ work choice greatly differed according
to household size. The explanatory power of the usual labor choice model
improved in one-member households, compared with larger households wheremore demand exists for home production activities. In labor supply estimationsof paid employee pension groups and Kokumin (basic) pension group,
entitlement to the earnings-related pension strongly encouraged retirement. The
effect was even more significant when the sample was limited to those who had
paid work experience at age 55, then the dominant mandatory retirement age:the entitlement reduced labor supply by about 30%, which was much higher thanrates given in previous empirical studies of males. In light of these estimates, theinstitutional change raising the eligibility age of pensions, now in place, andanother reduction planned in the Kosei pension level from the year 2006 can beinterpreted as encouraging a female labor supply.
Not inadequate labor opportunities, as in the case of men, but homemaking
opportunities may be the cause of the strong retirement effect evident for paid
female employees. The average income of other household members was much
lower in the case of women who replied that they had paid work at age 55:
279,000 yen, compared with 371,000 yen for women with no paid work
experience in the age group 55–59. The Social Life Basic Survey and otherJapanese time studies show that working wives carry most of the housekeeping
burden, which reduces their leisure time, whereas the male share ofhousekeeping work in the double-income family generally did not increase. Suchhousehold keeping burden may strongly encourage the retirement of females
once the pension entitlement is obtained. Another possibility is that womentarget their work years to obtain the pension entitlement. The Social Security
Agency Annual Report points out that two peaks in Kosei enrollment years areevident: 15 and 20, both of which are the minimum requirement years (Social
Security Agency [1997], 34). The percentage is much higher for women, as theenrollment years under 20 consist of 55% of females vis-à-vis 13% of males who
acquire an old-age Kosei pension.
For women without workforce experience, the entitlement or pension value hasa smaller effect on their labor supply decision. However, the transfer of husbands’
entitled income to their own pension—the 1985 Reform—was estimated to have a

48

Nobuko NAGASE

marginal effect in increasing their leisure activities.
Although this study has focused on the pension receipt and labor supply ofolder females, the pension scheme also has a large influence on the labor supplyof middle-aged women. One-third of married women now work as part-time
employees, and the proportion is increasing. Because they are exempted fromthe social security tax as dependent wives when their annual income is less then
1,300,000 yen, many of them adjust their working time to control their yearly
income within this boundary. In this way the labor supply of two-thirds of thesepart-time workers who do not participate in the Kosei pension plan is strongly
influenced by the pension rules (Abe and Ohtake [1997]). The public pension
scheme for part-time workers and dependent wives thus has a strong influenceon the labor supply of females and perhaps even on family formation. With theincreasing divergence of family life, such as the rise in single women, couples
without children, and working married women, more empirical study of theeffects of the pension scheme on females is required.

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