2011.12.4

Au Revoir, Welfare State

/Page 61-64, TIME November 28, 2011/

Introduction

In an afternoon TV show, I heard the entitlement age for the employee’s pension was going to be extended from 65 to 68. Coincidently, or maybe necessarily, the retirement age in France was also raised from 65 to 67 as a part of pension reform. These facts suggest that now we may be under the great change of social structure in the welfare states which provide world’s highest quality of social security system. If this is true, we Japanese should watch what is going on in France with s lot of care, because the country which will experience that next is Japan. 

Briefing

• Why now France is facing the reform for its famous welfare programs, even though it has succeeded to continue them?
• The financial reform for the government budget is necessary, but is it have to be done by only the austerity?
• If not, what is the alternative to fix the financial structure in France without undermining its social stability?

Opinion

    France and Japan seem to share something similar about structural problem in the social security system; the disproportionate demography, the shrinking workforce, and the increasing demand for pensions and healthcare by large aging population. But, in terms of finance, Japan looks a little bit better than France, because we have strong currency, and there is no bank that needs immediate bail-out. In such a context, we have some time before experiencing what is happening in France, and we can prepare for the coming social security reform. 

    Those two countries also have something different. For example, what is the budget source for social welfare programs in those countries? France definitely relies on tax income for them. But Japan with much lower taxation rates gets money not only from tax receipt, but also from the government bond which traded mainly between domestic firms and native individuals. That means our problem is more complicated and difficult to find proper solution.