RIETI Report December 22, 2023

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

Dear Readers,
Welcome to RIETI Report.
This bi-weekly newsletter will keep you updated with the recent columns, event information and research results by RIETI fellows and other leading economists in Japan and around the world.

In this edition, we are featuring topics related to the "annual income barrier" in which married women limit their annual income to a certain level to avoid tax and social insurance premium burdens in Japan. Now with the increase in minimum wage and labor shortages, we are seeing a new problem related to this self-directed income adjustment. Faculty Fellow Ayako Kondo et al analyzed the issue using individual-level panel data from 16 municipalities' basic resident registers and resident taxation records.

We hope you will enjoy it. If you have any feedback, we would love to hear from you (news-info@rieti.go.jp).
Editors of RIETI Report (Facebook: @en.RIETI / X (formerly Twitter): @RIETIenglish / URL: https://www.rieti.go.jp/en/)

This month's featured article

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

KONDO AyakoFaculty Fellow, RIETI

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."

To read the full text:

Related articles

"Perspective on the Annual Income Barrier Problem: Excessive awareness of the 1.03-million-yen barrier"
KONDO Ayako (Faculty Fellow, RIETI)

"Women-Supporting Policy Measures Turned into 'Barriers'to Employment and Increasing Income: Labor market mobility is key to narrowing gender inequality"
KITAO Sagiri (Senior Fellow, RIETI)

"Making the most of human capital: Removing policy obstacles to women's advancement"
KAWAGUCHI Daiji (Faculty Fellow, RIETI)

Related papers

"Labor Supply of Married Women, Kink-points on Tax Schedule and Social Security Premium Notch: Evidence from municipality tax records in Japan"
KONDO Ayako (Faculty Fellow, RIETI) / FUKAI Taiyo (Tsukuba University)

"Why Women Work the Way They Do in Japan: Roles of Fiscal Policies"
KITAO Sagiri (Senior Fellow, RIETI) / MIKOSHIBA Minamo (University of Tokyo)

Our latest discussion papers

"How Do Firms Attain Internal and External Flexibility of Employment?"
FUKAI Taiyo (University of Tsukuba) / KAWAGUCHI Daiji (Faculty Fellow, RIETI) / KONDO Ayako (Faculty Fellow, RIETI) / YOKOYAMA Izumi (Hitotsubashi University)

"Anatomy of Out-of-court Debt Workouts for SMEs"
HONDA Tomohito (Kobe University) / ONO Arito (Chuo University) / UESUGI Iichiro (Faculty Fellow, RIETI) / YASUDA Yukihiro (Hitotsubashi University)

"The U-shaped Law of High-growth Firms"
ARATA Yoshiyuki (Fellow, RIETI) / MIYAKAWA Daisuke (Waseda University) / MORI Katsuki (National Tax College)

"Green Transformation Innovation"
KIMURA Yosuke (Tokyo Institute of Technology)

"Zipf's Law without the Stationarity Assumption"
ARATA Yoshiyuki (Fellow, RIETI)

"Real Effects of Corporate Cash Holdings: Evidence from Japan"
HATTORI Masazumi (Hitotsubashi University) / FUJITANI Ryosuke (Hitotsubashi University) / NAKAJIMA Jouchi (Hitotsubashi University) / YASUDA Yukihiro (Hitotsubashi University)

[List of discussion papers]
[List of upcoming and past symposiums]
[List of upcoming and past BBL seminars]

* To subscribe, please go to SHANON's website.
SubscribeOpen a new window

Event Information

For a complete list of past and upcoming event information.



BBL Seminars

Fellow titles and links in the text are as of the date of publication.

For questions or comments regarding RIETI Report, please contact the editor.

*If the "Send by mailer" button does not work, please copy the address into your email "send to" field and connect the prefix and the suffix of the address with an "@", sending it normally.

RIETI Report is published bi-weekly.