The Japanese Social Insurance Agency

The SIA, which administers employees’ pensions and health insurance, is enbroiled in another scandal.

The Agency has previously been accused of using pensions contributions to build unnecessary facilities (which are often run by companies and agency related institutions which are given the job in the first place in a non-competitive selection process – the idea being to secure positions within these organisations for government bureaucrats after they retire from their government jobs) and thereby wasting pensions contributions. A serious claim (which the facts bear out), seeing that the aging population indicates that the system will run out of money before many current contributors get a chance to draw their pensions. The pensions system is based on a social contract whereby current contributors pay for the current set of pensioners. The system breaksdown when we see old people living longer, and a lot less contributors coming into the system due to the declining birthrate.

Anyhow, many people refuse to pay their contributions, either because they are young and can see they aren’t going to get a penny, because they could make use of the money now, or because they are rich and would prefer to make the money work for themselves rather than for other members of society. 30 something % of people who should be paying contributions are currently not doing so.

Clearly the SIA and the government as a whole see this as a problem, and the SIA has been on a drive to improve the contribution rate. A target was set for a 2% increase in the contribution rate.

The contribution rate equation is fairly simple.

Contribution Rate = # of Actual Contributors/ # of people who meet contribution guidelines

You would expect that the agency officials in the local offices around Japan would be going around to meet people on the non-payments list (mostly people who are not in employment or are self-employed, as most companies deduct at source) and discuss the situation with the people who are refusing to pay, and attempt to convince these people to pay.

They probably did get some people to agree to start contributing.

However, what they have also been doing, is to put people on the exemptions list, many without having processed the necessary paperwork.

At the current count (some local agencies are dragging their feet about making the data available) more than 70,000 people have been exempted from the contributions scheme without the correct procedural paperwork. It seems the agency officials have been phoning people and allegedly getting people’s authorisation over the phone, and then filling out the paperwork themselves.

The pattern has been repeated all over the country, and the SIA has denied that they gave orders for this kind of manipulation of the statistics. So it would seem that individual offices (either separately or communicating directly amongst eachother to share tips) have taken the initiative to improve their numbers by reducing the denominator of the equation, rather than increasing the numerator. I would think the latter would be the correct procedure per the spirit of the initiative.

So, if it is true that the SIA head office was not encouraging these types of tactics, we have a huge number of local managers who clearly are more focussed on meeting a target by hook or by crook, than in maintaining the integrity of the social contributions scheme.

The government has been trying to push through social insurance reforms since the allegations of wastefulness and bad management came to light. The proposal basically means splitting the health insurance and pensions parts, and giving the new agencies new names. There are accusations that the government is just trying to rebrand these functions, so they can get rid of the tarnished SIA name. With these new allegations which suggest that the SIA is rotten to the core, a simple rebrand isn’t going to be an effective solution. Yet LDP politicians claim that they have to make that change because otherwise we are left with the SIA which we know is a problem. Does the LDP think the public are that stupid? Apparently so.

This attempt is another example of cosmetic reform, to deceive the voters. For all his rhetoric, many of Koizumi’s reforms are the same. Yet many voters still vote LDP.

The LDP may be right about the ignorance/apathy of the public. The media doesn’t help either, with its short attention span and appetite for tabloid newsfodder over serious issues. The media would suggest they are giving the public what they want. So it comes down to finding some way of enlightening the public, who have been educated and trained not to think too much about the serious issues which affect us all.