Share 70% of Japanese women drop out of work when they have children

70% of Japanese women drop out of work when they have children Tax breaks for Japanese couples - as long as the wife doesn't work

Tax breaks for Japanese couples - as long as the wife doesn't work Over-regulation means 600,000 children are waiting for daycare places in Japan

Last year, in preparation for International Women’s Day, the Washington Post published a map of where female participation in the workforce is highest, colour-coding countries from red (lowest) to blue (highest). The results were mostly predictable: the UK, the US, Canada and Australia are all safely blue, with over 55% of working-age women in the labour force, while Middle Eastern countries like Saudi Arabia and Egypt are spots of bright red with less than 25%.

But these results can be misleading, and it’s all too easy to fixate on the emerging economies racked by institutional weaknesses and conflict which we know leaves women far behind their western counterparts. We should not forget developed countries which have internationally renowned infrastructure, education and healthcare systems, but which somehow block their women from contributing meaningfully to the economy. With International Women’s Day on Sunday, let’s turn the focus to a global powerhouse which has some of the most contradictory and discouraging labour policies in the world: Japan.

Japan has a strange relationship with its female workforce. Its women are some of the most educated in the developed world – almost half of all Japanese graduates are women. But the percentage of married women with children who return to work is shockingly low – around 30%. The Washington Post map shows female labour participation at 45-55%, but the real dynamics are more complicated, as around 70% of Japanese women give up work when they become mothers.

It is common wisdom that this is due to Japan’s cultural expectations regarding the role of women. Japan (the argument goes) is a traditional land of salary-man fathers and full-time stay-at-home mothers, with designated male and female spheres and an honour code which holds family duty as the greatest marker of success. So the pressure on women to dedicate their lives to child-rearing must be primarily cultural, we assume when we are faced with the 70% drop-out figure. A healthy dose of workplace sexism, with educated women consigned to clerical rather than managerial roles, and the expectation to work 60 hours a week makes up for the rest of it.

This tidy answer hides a number of tax and regulatory policies which may contribute to the low number of working women just as much as culture. For a start, the Japanese tax code offers a tax break to married couples – as long as the wife does not work. The breadwinner can deduct up to ¥710,000 (nearly $5950, £3860) from his tax bill if his wife earns less than ¥1.03 million a year ($8600, £5600). This is equivalent to paying women not to work, or at least not to work full time. And there’s evidence this is having a direct effect: “The Japan Institute for Labor Policy and Training’s 2010 survey found that about 25 percent of spouses who worked part time intentionally kept their job hours within the exemption threshold; 36.8 percent said they kept their income below ¥1.3 million to avoid paying pension premiums; and 26.4 percent said they did so to maintain their spousal-exemption status.”

This tax deduction was implemented in 1961, and with Japan’s birth-rate at 1.4 children per woman, a record low, there is strong sentiment that women need to stay at home and have more children – let’s not forget that this is the country whose health minister called women “birth-giving machines” in 2007. But the Japanese government has also made it harder for couples to have children by over-regulating childcare.

In 2013, although the official waiting lists for certified daycare places held the names of 25,000 pre-school-age children, the actual figure was estimated at between 600,000 and 850,000. So why hasn’t the market responded to this demand? “The short answer,” writes Minami Funakoshi in the Wall Street Journal, “is that often it can’t, thanks to government interventions. Subsidies for state-sponsored daycare skew demand while leaving the government unable to afford expansion. Meanwhile, regulations restrict the ability of private-sector daycare operators to build new centers.” It was only in 2000 that the government allowed the private sector to offer daycare at all, and restrictions still choke the industry, including a ban on efficient private operators running more than one facility. Rather than addressing these regulations, government policy has been to invest more in public-run daycare and increase the subsidies. This raises demand without enabling supply to naturally respond.

None of this is helped by Japan’s strict immigration laws, which prevent an influx of workers into the childcare industry willing to work for less. Prime Minister Shinzo Abe raised the possibility of allowing in more immigrants from South East Asia at last year’s World Economic Forum, but resistance is high. Less than 2% of Japan’s residents are foreign, compared to over 14% in the US, 12.4% in the UK, which drives up prices for what is generally considered low-skilled work like childcare and household services. (The Japan Times notes that “one typical Tokyo agency [charges] about ¥48,000 ($469) a month for three hours of cleaning a week. That compares with a monthly wage of $517 for live-in help in Hong Kong.”) The option to sponsor visas for domestic workers from abroad is currently only open to diplomats and foreigners, putting Japanese households at a disadvantage.

Since women are traditionally responsible for these elements of Japanese life, the laws are working with the culture to keep them out of the office and at home. Unlike women in Europe or the US, they simply do not have the choice of paying for domestic help.

Japan is finally waking up to the fact that it needs to make better use of its highly skilled and productive women. A paper from 2005 led by Japanese gender-economics expert Kathy Matsui, who coined the term ‘Womenomics’, found that: “Over the next two decades, Japan’s population is forecast to shrink by 6%… but its workforce population (age 15-64) is already shrinking and forecast to fall by nearly 10% within the next 20 years… As a result, based on current forecasts, Japan will have only two workers for every one retiree within the next 30 years and two retires for every three workers by 2050.” The same study also concludes that: “Increased female participation implies higher income and consumption growth which we estimate could lift trend GDP growth by 0.3 pp to 1.5% from 1.2% and boost per-capita income by 5.8% over the next 20 years.” This would be a huge success for a country enduring its 25th year of a “lost decade”.

Labour reform has been the key “third arrow” of Abenomics, and Abe himself has expressed support for Matsui’s “Womenomics” to help solve the problem. But so far, despite last year’s claims to ease immigration and childcare restrictions, little concrete progress has emerged. His ambitious aim to have 30% of leadership positions filled by women by 2020 addresses the symptoms of the problem, not the cause, and pressure for quotas on company boards is clearly not the answer. In fact, some of Shinzo Abe’s policies for luring more women back to work seem contradictory, including a call for companies to offer three full years of unpaid maternity leave, which is likely to derail women’s careers further and encourage them to stay in full-time motherhood. And pressuring company bosses to do more won’t help either – while the Japanese norm of long hours and inflexible career patterns is certainly hindering productivity for both men and women, corporate culture is not the main reason Japan’s women are not working.

Ahead of International Women’s Day 2015, it is clear that it isn’t just Japan’s traditional gender norms keeping its working-age women at home – it is rigid and deliberate government policy. And that doesn’t look set to change any time soon.

Rachel Cunliffe is Deputy Editor of CapX.

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