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Govt Eyes Measures to Tackle Part-Time ‘Income Barriers’

As labor shortages become an increasingly pressing issue amid the economic recovery from the COVID-19 pandemic, Prime Minister Fumio Kishida has said he will consider ways to overcome issues related to “income barriers” that impact part-time workers.

The Yomiuri Shimbun

The barriers are thresholds at which part-timers start paying taxes and social insurance premiums, and can result in some workers curbing working hours to avoid reaching certain income levels.

Health, Labor and Welfare Minister Katsunobu Kato has also expressed eagerness to tackle the issue. “I want to hold deeper discussions to consider what steps will be possible,” Kato said at the House of Representatives Budget Committee on Thursday.

One such threshold kicks in when part-time workers whose spouses are full-time company employees have a gross income exceeding ¥1.03 million, the level at which they have to start paying income tax.

Another threshold exists for those who work at companies with 100 or fewer employees and earn annual incomes of at least ¥1.30 million. As such part-timers are no longer considered to be dependents of their spouses, they must enroll in public pension and health insurance programs, which results in lower net incomes than earners who fall just below the threshold.

Those at companies with at least 101 employees who work at least 20 scheduled hours per week, among other conditions, start paying social insurance premiums if their annual income hits ¥1.06 million.

If their income reaches ¥1.50 million, the spousal tax deduction is gradually reduced, impacting their household’s overall income.

Some workers reduce their working hours or the number of workdays if their annual income gets close to these thresholds, prompting criticism of the system.

A government panel discussing reforms to the social security system has called for a review of the ¥1.06 million threshold, as it is considered as one of the structural problems that prevents married women from making more contributions to the workforce.

At a meeting of the lower house Budget Committee on Monday, Liberal Democratic Party Policy Research Council Chairman Koichi Hagiuda proposed income tax and social security premium exemptions for about five years for married part-time workers whose spouses are full-time company employees.

Meanwhile, the welfare ministry is changing rules regarding the size of companies at which part-time workers are eligible for inclusion in employee pension programs as part of efforts to stabilize pension financing.

Efforts to rectify the barrier issue such as lifting the income threshold at which workers enroll in pension programs appear to run counter to efforts to reform the pension system.