Minimum Wage, Earned income Tax Credit, Child Allowance and Basic Income in Japanese Policy Reform

1. Minimum Wage, Earned income Tax Credit, Child Allowance and Basic Income in Japanese Policy Reform Shinji Murakami (Ritsumeikan University Post-Doctral Felllow)

2. The Government Changed in Japan, 2009 Some of the policies reforms are relevant to BI(basic income) Focusing on MW(minimum wage), EITC(earned income tax credit), CA(child allowance) Discussing Japanese tax reform which is related to the affordability about BI Introduction

3. The process determining the regional MWs (1) national MW council : the public interest , employers, employees →establishing “reference's wage” (2) local MW councils →the national council has a significant on the final decisions of local councils. 1. Minimum Wage1.1. Minimum wage in Japan

4. In the negotiations of the national council →The opinions of representative of the public interest are a decisive factor →There are always conflicts between the representatives of employees and employers 1. Minimum Wage1.1. Minimum wage in Japan

5. An industry MW is determined by the deliberation of national council ←The national council accepts the necessity of increasing specific industry MW 1. Minimum Wage1.1. Minimum wage in Japan

6. January 28, 2010 The Ministry of Health, Labour and Welfare The Ministry of Economy, Trade and Industry →Setting up a task force to examine the effects of increasing the MW →Intending the aim of immediate level is 800 yen per a hours 1. Minimum Wage1.1. Minimum wage in Japan

7. Card and Krueger (1995) and Tachibanaki and Urakawa (2007) (in Japanese) →Advantage in increasing MW →Increasing employment, rising the working poor's income 1.2. Effects of increasing MW

8. Some studies(Neumark and Wascher (2008), Kawaguchi and Mori (2009) etc.) →Reducing employment opportunities for less-skilled worker →Tending reducing their earnings 1.2. Effects of increasing MW

9. Negative advocate about minimum wage： Suggesting refundable tax credit or BI Whether increasing MW is compatible with BI in the Japanese social context 1.2. Effects of increasing MW

10. A central point: The level of BI or refundable tax credit and the range increasing MW High level of BI →MW may not be necessary Low level of BI →MW could play important roles 1.2. Effects of increasing MW

11. Potential Increasing MW in Japan (cf. OECD 2007 date) →Not low rate of Japanese unemployment 1.2. Effects of increasing MW

12. The high level of corporate tax in Japan →a lower rate of corporate tax →compensating the increasing minimum wages in Japan 1.2. Effects of increasing MW

13. The high level of corporate tax in Japan →a lower rate of corporate tax →compensating the increasing minimum wages in Japan 1.2. Effects of increasing MW

14. EITC as more modest or mini version of the negative income tax →The Japanese tax commission , 2009 →Some researcher have examined the feasibility of EITC in Japan →EITC is characterized by workfare policy 2. Refundable tax credit2. 1. The earned income tax credit

15. EITC can be interpreted as a variation of BI →EITC is conditioned on work →However, refundable income tax credit is not necessary work Example : Child allowance(CA) started in Japan, June 1, 2010. 2. Refundable tax credit2. 1. The earned income tax credit

16. A refundable tax credit is related to child care support policy The Democratic Party of Japan's the House of Representatives election manifest in 2009： An allowance for each child up to the third grade in middle school (15 years old) 2. Refundable tax credit2. 2. Child allowance

17. The Democratic party planed to make the monthly 26000 yen allowance a permanent measure CA is without a means test →partial BI →However, the present administration plans to give half the amount, or 13000 yen, in fiscal 2010 2. Refundable tax credit2. 2. Child allowance

18. →In the newest plan, the amount of CA is added after 2011 →The added amount of CA is possible for substituting social service (ex: increasing nursery school) →These combination is determined by the localgovernment as administrative localization 2. Refundable tax credit2. 2. Child allowance

19. CA is selected by the category ⇔The variation of partial BI is a kind of negative income tax which is selected by means-test 2. Refundable tax credit2. 2. Child allowance

20. Examination about the relation EITC and negative income tax in japan →Applying to Japanese welfare policy 3. The possibility of realizing partial basic income in Japan

21. The difference between and the negative income tax and BI →The form of provision (ex-ante / ex- post), means-test 3. The possibility of realizing partial basic income in Japan

22. Focusing on the similarity of synthesizing the income tax regime and subsidy policy Relating to the computerization of tax technology and the social security number to capture just individual revenue level 3. The possibility of realizing partial basic income in Japan

23. The progressive rate of income tax flattend 3. The possibility of realizing partial basic income in Japan

26. Suggesting a return to more progressive income tax and increasing rate of consumption tax. →not just to raise revenue but to narrow the Japan's income inequality 3. The possibility of realizing partial basic income in Japan

27. Suggesting a return to more progressive income tax and increasing rate of consumption tax. →not just to raise revenue but to narrow the Japan's income inequality 3. The possibility of realizing partial basic income in Japan

28. →Examining the refundable tax credit as compensating low income earner for increasing rate of consumption →Partial BI 3. The possibility of realizing partial basic income in Japan

29. There are difficult problems →The change will link to some variation of BI 4. Conclusion