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During the COVID-19 pandemic, an unprecedented amount of subsidies was disbursed to business operators to cover the cost of employee absences as a measure to guard against unemployment. To help prepare for another crisis, the government must examine the effectiveness of these subsidies and related problems that arose.
To prevent a large number of workers from losing their jobs amid the spread of the novel coronavirus, the government implemented special measures — that ran until March — for the employment adjustment subsidy program, helping firms cover a portion of leave payments so employees could take official leave rather than get laid off.
Under the government’s special measures, subsidy payment limits and coverage rates were raised, and the application process for companies was simplified. As a result, ¥6.3 trillion was paid out in subsidies — far exceeding the amount provided following the collapse of U.S. investment bank Lehman Brothers.
States of emergency were repeatedly declared during the pandemic, forcing businesses to suspend operations and people to stay home. In light of the resulting economic stagnation and an uncertain future, it can be said that the government’s response was appropriate in terms of trying to protect employment through a flexible implementation of the subsidy program.
However, the exceptional measures remained in place for as long as three years, giving rise to certain problems. Most notably, it cannot be overlooked that some companies obtained the subsidies illegally.
Because priority was given to expeditious payouts, the application screening process became lax, prompting some business operators to falsely claim that their employees were on leave, while in reality, they continued to work. To date, it has been found that some ¥33 billion was paid out for falsely claimed subsidies.
Of this amount, more than ¥10 billion reportedly has not been returned. The government needs to step up pressure on companies and intensify its cash-reclamation efforts. In serious cases of wrongdoing, criminal charges must be sought.
The Health, Labor and Welfare Ministry has begun reviewing the special measures that prompted the mass payout of the employment adjustment subsidies. It is hoped that the ministry will scrutinize issues including the extent to which the measures helped workers retain their jobs and the industries in which there were numerous cases of spurious subsidy payouts.
Another focal point of the review will be the extent to which the subsidies helped protect non-regular worker employment. How many cases were there in which only the employment of full-time workers was protected while non-regular ones were dismissed? This point must be clarified to help improve employment-related circumstances for non-regular workers.
If employees are placed on leave for too long, they could lose their motivation to work and experience a decline in skills. It also has been pointed out that generous compensation for work absences could discourage people from changing jobs and improving their abilities.
Employment adjustment subsidies are financed by firms’ work insurance premiums. The special measures have strained the employment insurance system. If the nation is hit by another crisis, it will be difficult for the government to match the huge subsidies seen during the pandemic.
It is hoped that the government will deepen discussions aimed at improving the efficacy of the subsidy program by taking into consideration such factors as payout periods, requirements for the subsidies and a smooth return to the workplace following a period of absence.
