Tuesday, May 18, 2010

One Thing to do before Focusing on Child Care

Employment policies would provide necessary 'parent care'

"Work is the backbone of life." -- Freiderich Nietzsche

The Child Care Act has become law, so starting this June, families will receive an extra 13,000 yen per child. Most major newspapers are saying that the measure was enacted as part of Democratic Party of Japan chief Ichiro Ozawa's strategy for winning the upper-house elections. A government handout of cash is likely to influence the elections. But we can't call this just politics. Politicians must govern in a moral way.

There are many problems with this approach. Let me point out two. First, the plan is to make this child subsidy permanent, but the legal standing for it is vague. The version that just passed is effective for only one year. There's no clear guarantee from the second year. Citizens have a lot of thoughts about this. I have been receiving emails and letters about this issue. I'd like to share one:

"I welcome the child-care subsidy, but I'd like it to continue once it starts. However, if you think about our fiscal resources, it seems likely that there won't be money to fund the program at some point. That's the biggest sticking point for me. I'd like them to make it so there's never a situation where a child has to stop going to school."
Looking at the economic situation today, it's very unlikely that tax revenue will grow next fiscal year. The DPJ has pledged that next year's child-care subsidy will double. The problem is whether we have the fiscal resources.

The second problem is the way the funds are being allocated by the government. The DPJ and the Hatoyama administration are calling the child-care payments both social welfare and economic policy. As far as economic policy is concerned, having government hand money directly to the citizenry is very low on the list of effective measures.

Economic policies that involve outlays of government cash must work to enrich the whole country. The government is expected to use government funds to -- as much as possible -- revive the economy for the benefit of the whole society. First, revive industry and business. Then reduce unemployment, getting pay into the hands of as many people as possible. Then improve family living standards. That's how it's supposed to be done.

A worker should be able to handle household expenses from his or her income. The normal state of things should be that the head of the household has stable work that rewards him or her with enough money to cover expenses and provide for the family. The first thing the government should be doing is helping people get to this state. That's the government's role.

The government's policy on social welfare should be to help those who can't fill the available jobs. It should make solving the unemployment problem a top priority.

It's too bad that this distorted view of the government's economic policy has spread recently. More and more economists, analysts and business journalists are saying there's no need for the government to enact full employment measures. There is hardly anyone advocating full employment as a policy. This is the Achilles' heel of politics.

The government should aim for full employment and reduce the number of jobless people. I'll go so far as to say that before we start doling out allowances for households with kids, we should resolve the employment situation for young men and women who want to become parents and raise their own families.

The Hatoyama administration and the DPJ are wrong when it comes to economic policy. The most important thing the government can do right now is enact employment policies and boost the economy. Especially necessary are investments in the provinces to improve peoples' livelihoods. Public investment has dropped precipitously. The Hatoyama administration's plan to dole out money to families to bring about economic recovery is likely to try the most patient man's soul.

It's the government's duty to find ways to make sure able and willing people have a place to work.