Raising of employment insurance premiums again and their problems

The overall unemployment rate, which was 2.2% in FY1992, has since
increased each year, and exceeded 5% in FY2001. The number of
unemployment insurance recipients also increased year by year, from an
average 570,000 people per month in 1992 to over 1 million people in
FY1998, and has continued to increase steadily. On the other hand,
growth in premium revenue has continued to stagnate because of the
lingering recession. Ever since FY1994, deficit between income and
expenditure has been dealt with by using reserves accumulated from
employment insurance. These reserves, however, are expected to run
out in FY2003.

The reserves amounted to 4,752.7 billion yen in the peak period of
1993. By the end of FY2001, however, they had fallen to about 500
billion yen. For this fiscal year's budget, it is anticipated that
about 360 billion yen's-worth of reserves will be used up.

Under these conditions, it was decided that the rate of employment
insurance premiums--to be borne on a 50% basis by labor and management--would be raised, on an emergency basis, from the current 1.2% of monthly income to 1.4%, up 0.2%. This new premium rate is planned
to be imposed in October. As a result, both labor and management will be
forced to bear costs of 150 billion yen more by the end of this fiscal
year.

This means that a worker earning 300,000 yen a month, for example,
must pay 300 yen more each month for employment insurance, from the
current 1,800 yen to 2,100 yen.

Implementation of this new rate is based on the so-called "flexibility
clause" as announced by the Minister of Health, Labour and Welfare,
and makes it possible "to increase or decrease insurance premiums to
within 0.2% of the current amount, provided that the views of the
Labor Policy Council are taken into account." This does not entail
any amendments to the law.

Phenomena such as the aging of the population and the shrinking
number of children are progressing in Japan, as has been anticipated.
However, the economy is taking an unexpectedly long time to recover,
and the repeated raising of employment insurance premiums is clearly
one effect.

The rate of employment insurance premiums was raised just recently
from 0.8% to 1.2% in April 2001 after modifying the Employment
Insurance Law. Changing the rates of premiums in the future, which
would lead directly to increasing the burden on both labor and the
management, should naturally be premised on an accurate projection of
Japan's future unemployment rates, as well as on a full-scale
reexamination of insurance benefits and premium payments.

It is also possible that some may propose reducing the current
unemployment allowance benefits (60 to 80% of the salary a worker had
been getting before leaving his or her job), partly to encourage the
unemployed to seek re-employment more actively. The key, therefore,
would be to coordinate different views and opinions of not only labor
and management, but of various circles.