Households face staggering rises in social welfare costs

by Hiroko Nakata

Staff Writer

The average household headed by a corporate worker will face a much heavier financial burden in 2015 if the consumption tax and other social security costs are raised, according to analysts.

In addition to the planned consumption tax increase, the government is significantly increasing pension premiums for corporate workers and abolishing the allowance for child-rearing.

Together with other expected hikes in welfare costs, a couple 40 or older with a single salary of ¥5 million and two children will have to bear ¥328,900 more in 2016, a report by Daiwa Institute of Research says.

“At every type of household surveyed in the report, disposable income in real terms falls by 5.1 percent or more in 2016 against 2011, and the biggest factor is a rise in the consumption tax,” said researcher Shungo Koreeda, who wrote the report.

Koreeda said a 10 percent tax would add ¥167,000 to the burden in 2016 for a household with a couple 40 years old or older and two children aged 7 to 12 with a single income of about ¥5 million.

By that year, public pension premiums for corporate workers are scheduled to rise ¥44,100 from 2011.

The abolishment of child-raising allowances will increase their annual financial burden by ¥54,000 and ending the tax exemptions on child support will cost ¥66,000, according to the report.

The estimates don’t include possible hikes in electricity rates. Tokyo Electric Power Co., which raised rates for corporate customers in April by an average of 17 percent, has said it plans to raise household rates this summer.