The "Annual Income Barrier" Issue: Careful discussion based on data is necessary

The issue of the "annual income barrier," in which married women limit their annual income to a certain level in order to avoid tax and social insurance premium burdens, is attracting attention. This problem itself has been pointed out for quite some time, but with the increase in the hourly wage in response to the minimum wage increase and labor shortages, the phenomenon of a decrease in operating hours as a result of higher hourly wages has become a new problem. Coupled with the expansion of social insurance coverage to part-time workers, the government has launched a package of countermeasures, and political interest is high.

The Mystery of the 1.03-Million-Yen Wall

Kondo and Fukai (2023) conducted a descriptive analysis of labor supply of married women using data from 16 cooperating municipalities' basic resident registers and resident taxation records that were joined and anonymized. Using individual-level panel data that included information on salaries and various types of income and household composition, we analyzed the data from various angles, including changes before and after life events and differences by husband's income and employment status.

The figure shows a histogram of salary income for married women created with the data used in Kondo and Fukai (2023). The vertical dotted lines indicate delineations, respectively, of the annual income amount of 1.03 million yen under which dependents are not subject to income tax, and the amount of 1.3 million yen under which dependents are not required to join the national pension and national health insurance programs as payees. The graph clearly shows that these two are the main "annual income barriers."

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