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Financial resources for the employment insurance program have become strained as the total paid in employment adjustment subsidies has ballooned due to the prolonged coronavirus pandemic. It is hoped that discussions on raising insurance premiums will deepen.
The Health, Labor and Welfare Ministry’s Labor Policy Council has started studying ways to secure funds for the program. The council said it will decide on the matter by the end of this year.
The employment adjustment subsidy system is designed to avoid unemployment by helping companies, which allow their employees to take leave from work rather than firing them, pay part of the leave allowances. Since last year, the government has taken special measures to raise both the subsidy amount and the subsidy rate as part of efforts to combat the pandemic.
Despite the pandemic, Japan’s unemployment rate has not risen as much as the levels in other countries. An analysis in this year’s White Paper on the Labor Economy showed that such subsidies helped curb the jobless rate by a monthly average of 2.6 percentage points.
An increase in unemployment has a great impact on society. It is crucial to reinforce the safety net of employment.
The total amount of subsidy payments, which was ¥2 billion in fiscal 2018, surged after the outbreak of the coronavirus and has reached a cumulative total of ¥4.5 trillion since last year. Given the situation, securing financial resources is a challenge.
This subsidy program was originally designed to pay subsidies from a reserve fund financed by employment insurance premiums. However, under a special law, the government has borrowed ¥1.6 trillion from a reserve fund set aside to pay unemployment benefits and injected ¥1.1 trillion from the general account of the state coffers since last fiscal year in order to expand the subsidy program. Nevertheless, funding for the program is evidently becoming scarce.
First of all, financial resources must be secured to keep the program running for the time being. The reserve fund for unemployment benefits, which stood at ¥4.4 trillion in fiscal 2019, is expected to drop to ¥400 billion by the end of this fiscal year. Additional expenditures from the general account are likely to be inevitable.
It is essential to discuss how much employment insurance premiums should be paid by companies and employees, with a view to the next fiscal year and beyond.
The combined rate of premiums paid by the labor and management side is currently 0.9% of wages. In principle, this rate is set at 1.55%, but it has been kept low as the employment situation was robust and relatively sufficient financial resources were available before the outbreak of the coronavirus.
Despite the scarcity of financial resources, it is difficult to significantly increase the burden on companies and workers given their current situation amid the pandemic. It appears to be realistic to raise the premium rate in stages.
Currently, the government has implemented a special measure to raise the maximum daily subsidy amount from about ¥8,300 to ¥15,000 per person on leave. It is likely to be important for the government to determine when to reduce such special measures based on coronavirus infections and employment.
There has been case after case of companies illegally obtaining the subsidies by falsely claiming that they allowed their employees to take leave. The government is urged to strengthen measures to prevent such fraud and misuse through steps such as filing criminal complaints.
— The original Japanese article appeared in The Yomiuri Shimbun on Oct. 10, 2021.
