Pension Plan Reform: From the Perspective of Labor Cost Control

ABSTRACT

On the dawn of 21st century, Japan will become the eldest society in the world. Thepopulation ratio of 65 years old and over will continue to rise and reach to 17.2% in 2000,27.4% in 2025, and 32.3% in 2050. It's speed is so fast that the partiality among generationson cost burden-benefit balance of pension, medical care and long term care will become worseand reach to an unacceptable level. This increasing burden of public welfare system willeliminate corporate profits and erode the ability of Japanese economy in the internationalcompetition. Therefore, the total reform of public welfare system is extremely needed.

Among public welfare plans, the role of public pension should be reduced. The pensionreform proposal of MNW (Ministry of Health and Welfare) plans to cut the total amount ofpension benefits by about 15% as of 2033. However, 30% cut is necessary to restrain the ratioof public to national income to 50%. To accomplish it, the pension benefit should be revisedby actual CPI increase minus 1% from 2000 to 2020. This makes it possible to mitigate thepartiality and freeze the public pension premium rate for the next 2 decades.

One of the reasons for unsolved debates on medical care reform is that an idea of imposingmore cost burden on elder people has not been accepted. However, to curtail overcare medicalcost, it is essential. Therefore, the Old-Age Health Insurance, which MNW plans to introducenext year, should be diversified into a few types in terms of premium rate and out of pocketexpenditure.

Key words for Living Security System in 21st century are "expansion of self-help" and"individual choice". Economic situation and people's sense of values, which are the premisesfor system design, have always been changing. In order to overcome such a big wave of eldersociety, we should reform the current system to reflect each individual choice.