Double Dipping

Double Dipping: Collecting Pension While Working

Double Dipping: Collecting Pension While Working

Outline

Introduction

The United States, Germany, and many other developed countries not only have pay as you go public pension systems that are very similar to Japan's but also face very similar demographic trends. Thus, the Japanese experience with and debate about, pension reform are of great potential value to policy makers in these countries, especially since the problems with Japan's public pension system are in many ways more serious and the aging of the population is proceeding much faster than in these countries. (Niwata, 1983, 172)

The first public pension system for private sector workers (a pension system for seamen) was not established until 1939, and a comprehensive pension system for private-sector workers the Employees' Pension System was not established until 1941. It was not until 1973 that benefit levels were increased enough to make the replacement rate comparable to what it is in the major developed countries (roughly 60 per cent), and it was not until the same year that automatic cost of living adjustments were introduced for the first time. Since then, benefits have been adjusted not only for consumer price inflation but also for increases in real wages.

Problems with Japan's current public pension system

In this section, I discuss four problems with Japan's current public pension system: (1) the adverse impact on intergenerational equity, (2) the adverse impact on intergenerational equity, (3) the adverse impact on the labor supply of the aged and of women, and (4) the adverse impact on private saving.( Noguchi, 1987, 198)

Japan's public pension system is redistributing resources from younger cohorts to older cohorts on a massive scale.

The adverse impact on intergenerational equity

There are at least two reasons for this. First, benefits were made much too generous relative to contributions at the time of the 1973 pension reform, especially for those close to retirement in 1973, as a result of which the lifetime benefits of older cohorts far exceed their lifetime contributions. For one thing, even those who were too old in 1973 to contribute for the required number of years were made eligible to receive fairly generous benefits as a transitional measure.

The adverse impact on intergenerational equity

The current public pension system has an adverse impact on intergenerational equity in at least three ways. First, in any given cohort, the net transfer from the government arising from the public pension system is larger, the higher ...