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Section 3. Objectives and Functions of Social Security

1. Objectives of Social Security

The following paragraphs outline the major objectives of social security, taking into considerations changes in the definition of social security described in Section 2.

(1) Security and stability of living

As explained in the paragraphs on the postwar social security changes, the present objective of social security is to ensure the entire citizens sound and anxiety-free lives through implementing social security systems to help them in case of instability of living and to prevent such instability.

In the period immediately after World War II, the main objective of social security was to give relief for the needy and to prevent poverty, as shown in the recommendations made by the Advisory Council on Social Security in 1950. The objective was based on the concept stated in the Constitution of Japan ("All people shall have the right to maintain the minimum standards of wholesome and cultured living"). The public assistance system fulfilled the function of relief for the needy, and the social insurance system represented the function of preventing poverty. Also in the recommendations made by the Advisory Council in 1962, mainly concerning relief for the needy and prevention of poverty, plans on social security systems were made targeting each of social groups classified into the needy, low-income class, and general- income class.

Presently, however, the social security objective has exceeded the range of relief for the needy and prevention of poverty, and is changing to wider security of national life. In accordance with the elevation of the living standard, the benefit levels ensured by the social security systems have also exceeded the levels for ensuring the minimum level of living, which was the level to be attained in the relief for the needy and prevention of poverty. For example, the social welfare services including the welfare services for the elderly and the public pensions provided in proportion to the pre-retirement income are not just for preventing poverty. They are provided to improve the living quality; to support independence; and to compensate for the lack of earning ability after retirement.

The "life with a minimum standard of health and culture" ensured under the public assistance system does not simply mean a living for existence. It means to lead a respectable life as a human being. The minimum level of living ensured under the system is not therefore fixed and will be changed and improved in relation to social and economic situations, to the living standard of the citizens and to the social background.

Social security, however, does not ensure people the minimum level of living without condition. In the society of free economy, it is basically each one's responsibility of self-help effort to maintain and manage his/her life. In preparation against unforeseen events to which an individual citizen cannot easily deal with for himself/herself, social security ensures ways of living towards a stable life through systems established based on the idea of social solidarity.

(2) Support to individuals for independence

"Independence" generally means to lead an independent life without receiving supports or controls by others, to lead an independent life without relying on others' help despite physical disabilities, or to lead a mentally independent life even physically needing others' help.

Although it is basically required for each one to lead an independent life for himself/herself, unforeseen events such as illness and accidents, corporate bankruptcy, or physical weakness in his/her old age may hinder the maintenance of independent living. Besides there are some people who cannot live independently and need others' help because of disabilities by nature. One of the social security objectives is to support people suffering from such events or disabilities to lead respectable lives in independent manners according to their own lifestyles in family and region, regardless of disability or age. By implementing measures to support people in difficulties to lead independent lives, the social security systems enable such people to live and take actions on their own responsibility and judgement, and provide them with possibilities to step into the new stages of their lives.

Support for independence is an idea that has been traditionally existing in the welfare field. For example, the public assistance system aims at ensuring the minimum level of living to all the needy, and at promoting their independence. Here independence does not simply mean "not to receive public assistance" but also "to display one's ability and to lead a social life appropriately based on the ability." In the welfare system for people with disabilities, the support for their independence has been one of the objectives, and multiple measures have been promoted to improve the welfare services and income security including the implementation of education, sheltered work programs and job training. In the recent years, in accordance with the popularization of the idea of normalization, the importance of support for independence has been further emphasized for people having some kinds of handicaps, not limited to those with disabilities.

Also in the examination of new social security systems, greater importance is placed to the idea of support for independence. In the creation of the long-term care insurance system, the "independence of the elderly" is proposed as one of the basic principles for the care of the elderly, and is incorporated in Article 2 of the Long-term Care Insurance Law. Here support for independence means to give support for the elderly to lead high-quality lives based on their own wills even when they need some cares. Also in the revision of the Child Welfare Law in 1997, the names and functions of child welfare facilities were reviewed based on the basic principle of support to children for independence. Here support for independence means to support children in need of protection so that they can develop their personalities and live vigorously as independent members of society, in addition to protect them in the facilities.

(3) Support of household functions

Some of the social security systems are taking over the functions that have been privately fulfilled by each household including the care of children in need of such care, care of persons (children) with disabilities, rearing children and giving support to aged parents. Outsourcing under the social security systems of such functions has become necessary for the following reasons. The traditional household infrastructure has been weakened due to the increase in the number of nuclear families and to the downsizing of family scales; the living environment and people's values on living have been changing; and the average life span of Japanese people has been prolonged. Because of these, some of the household functions can no longer be privately met and need to be supported by the society.

Giving necessary support to families suffering from diversified problems through social systems will prevent the breakup of family lives and will lead to the stabilization of living and intensification of psychological links among family members. Under certain household environments, the rights of children to grow sound and healthy or the rights of people in need of care might be endangered. In such cases, by giving support to the families through social security systems, the rights of the children or of the people needing care will be protected. Furthermore, in addition to giving support for household functions, the improved child care services or long-term care services will enable both men and women to work while rearing children or taking care of their family members. As a result, the services will contribute to Japan's economic growth through the promotion of a society in which both men and women can equally participate and through the expansion of labor power.

The functions to be fulfilled by families such as child rearing, care of family members, or giving support to old parents have been traditionally supported by mutual assistance among families, relatives and local communities. It can be said that social security changes this private form of mutual assistance into a social one.

2. Functions of Social Security

Next, social security has the following four functions, and there are a lot of overlaps among the functions. They are a) function as a social safety device (social safety net); b) redistribution of income; c) diversification of risks; and d) social stability and economic stability and growth.

(1) Social safety device (social safety net)

Social security functions as a social security device (social safety net) for ensuring stable and anxiety-free lives in preparation against difficulties that might endanger the stability of living such as illness, injury, need for care, unemployment, retirement without means to earn money, and unforeseen accidents.(Note)

For example, in case of illness or injury, you can easily receive medical services with the medical expenses paid by medical insurance. Even if you retire from your work and have lost the means to earn money yourself, you can receive old-age pensions to lead a stable life. Besides for the needy who cannot be supported by other social security systems, the public assistance system ensures them the minimum level of living.

Thanks to the social safety net provided by social security, each one can lead a vivacious, challenging and attractive life without fearing risks, which eventually leads to the activation of the entire society. Inversely, if the social safety net becomes unstable, people will feel uneasy and many of them will, for example, restrain consumption and save money in preparation against the future anxieties. This will badly affect the economy and the society will be less active.

When we consider the function of Social Security as 'Social Safety Net', the level of and method for providing the social safety net should be appropriately determined. As mentioned in 1(1), the benefit level of social security has already exceeded the level of simply preventing poverty.

Besides the safety net should not be a single net: it needs to be formed in multiple layers to prepare against different situations. For example, the mechanisms, financial resources, and security levels should be different for each of the medical safety net against illness and injury, safety net for income security in people's old age, and safety net for long-term care of people needing such care. Thanks to the existence of the multiple-layered social safety nets comprising of social insurance such as medical and pension insurance and of social welfare including welfare for children, the elderly, and for people with disabilities, people can lead their daily lives without worries. Among the social security systems, the public assistance system gives protection and ensures the minimum level of living to all the needy who cannot be supported by other social security systems according to their needs. The public assistance system can be said the "last resort" and the "last safety net" for people.

(2) Redistribution of income

Under the free economy in which individuals and companies are engaged in economic activities basically at their discretion, each person basically earns income as rewards for his/her production activities. The income levels differ by person, reflecting his/her ability, efforts, positions, etc. The trends of the market economy, however, may not always result in the fair distribution of income to which everyone can be satisfied with. For example, the labor market is more restricted for people with disabilities and for the elderly than for general workers, and the wage levels are generally lower. For a family with a parent and an infant, the income may be low due to the restrictions on the working hours. If a worker gets ill or injured by an accident and can no longer work, he/she will lose the means to earn money. Besides due to the inheritance system, there are differences in people's assets regardless of their efforts.

Redistribution of income is an effective measure to reduce income differences and to stabilize the lives of the low-income class in the situations in which the market economy alone cannot ensure social fairness. For the redistribution, the income is transferred among individuals and households through the tax system and social security systems. Specifically, for the redistribution of income between different income classes, funds are raised from the high-income class to be transferred to the low-income class, or within the same income class, money is transferred from people who can earn income to those who no longer have means to earn income.The redistribution of income includes the provision of medical or child-care services in kind, in addition to the transfer of money.

The "safety net" has two meanings. For the first meaning, it represents a net placed over the floor to prevent injuries. For example a safety net is used in a circus to prevent performers standing on the rope placed high above the earth or trapeze performers from getting injured in the event that they fall to the ground. For the second meaning, it represents a mechanism or a device to give assistance to people in difficulties or to prevent people from falling into such difficulties. "Safety net" is often used for the second meaning, not necessarily limited to the field of social security.

For example in the public assistance system, income is redistributed from the people with high income to people with low income through the tax system as the financial resources. In the medical insurance system, income is redistributed from healthy people to unhealthy people and the main financial resources for the redistribution is the insurance premiums. Each person also redistributes his/her income to himself/herself in his/her life cycle: the savings accumulated while he/she has ability to earn income will be transferred to the living expenses in his/her old age or in illness. It can be said that the public pension system redistributes income from the working generations to the older generations, using the insurance premiums as the financial resources.

Figure 1-3-1 compares the initial income (income before the redistribution of income through the tax system or social security systems) with the income after the redistribution based on the results of the survey on the redistribution of income conducted in fiscal 1996. According to the Figure, the redistribution coefficient is in plus for classes earning less than \5 million as the initial income. This implies that income is redistributed from households earning \5 million or more to those earning less than \5 million as the initial income. The average initial income for the lowest-income class with the initial income less than \500,000 is \50,000, but the income is increased by 57 times to \2.84 million after the redistribution. As a result of the redistribution, the income differences between the average income of the lowest-income class and the average income of the entire households have been reduced from about 125 times for the initial income to about 2.2 times for the income after the redistribution. Social security thus works as a system for redistributing income like the tax system, reduces income differences and increases the income of the low-income class as explained above.

(3) Diversification of risks

The basic principle of society is for each one to be independent and to take action at his/her own risk. There may often happen, however, unforeseen events that individuals cannot deal with for themselves such as illness, accidents and unemployment. Social security provides a mechanism for the entire society to deal with such uncertain risks in people's daily lives, and contributes to the diversification of risks by minimizing the influence exerted by a risk through provision of capitals, etc. It can be said that social security can fulfill its function as a social safety net by effectively promoting the diversification of risks and the redistribution of income.

The representative system that works for the diversification of risks in the social security systems is the social insurance system. The public assistance system and the social welfare system also contribute to the diversification of risks in that public assistance or welfare benefits are provided to support the lives of people who have fallen into poverty or are in need of care for some reasons.

(4) Social stability, and economic stability and growth

As shown in (1) to (3) above, social security has the function to stabilize society and the government by giving a feeling of security to people, giving support when they actually become difficult to live, or redistributing income to reduce earning differentials.

Besides social security mitigates economic fluctuations for economic stability, and supports the growth of economy. For example, continuous provision of fixed amounts of money even in the periods of economic depression as under the public pension system not only stabilizes the lives of old people but also mitigates economic fluctuations (as built-in stabilizer) by encouraging consumption based on pensions as financial resources. Furthermore, the reserve for pensions held under the public pension system has been utilized as the financial resources for fiscal investments and loans to fund the improvement of social capitals and the economic development.

Also on an individual level, social security is economically quite effective. For example, a substantial medical insurance system frees people from anxiety about illness and encourages people to see a doctor at an earlier stage of illness, which will lead to earlier recovery of health. For workers, such promotion of health will contribute to the maintenance and improvement of their working abilities, and to the maintenance and increase of income. Besides substantial childcare or long-term care programs prevent people from quitting their jobs for such reasons as for raising their children or taking care of their families, and will encourage people (mostly women) who have not been able to work because of childcare or care of their families to work. In terms of employment creation, the fields of health, medical care and welfare alone provide jobs to more than about 3 million people, and it is expected the fields will further grow in accordance with the progress of the aging society, etc. A substantial public pension system reduces heavy pressures on children to give economic support to their old parents, and contributes to free the elderly from anxieties about their lives.

Figure 1-3-1. Average Initial Income and Income after Redistribution by Income Class
(Based on the survey conducted in fiscal 1996)

Average Initial Income and Income after Redistribution by Income Class (Based on the survey conducted in fiscal 1996)

As explained above, substantial social security systems are indispensable for economic stability and growth.

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