"Boss, Please Reduce My Working Hours"... The Strange Phenomenon Following Wage Increases

Minimum Wage Hike Brings Workers to the "Annual Income Wall" Sooner

Exceeding 1.3 Million Yen Means Loss of Dependent Status and Higher Insurance Premiums

Contrary to the general expectation that raising the minimum wage would lead to greater income as people work more, Japan is experiencing the exact opposite. With hourly wages rising, more part-time workers are actually reducing their working hours. This is to avoid the so-called "income barriers," where tax and social insurance contributions increase substantially once a certain income threshold is crossed.

A woman working part-time in logistics. Getty Images

According to the Nihon Keizai Shimbun on September 30, an estimate by Itochu Research Institute, based on the Basic Employment Structure Survey and other data, found that between April and June this year, the number of short-hour workers who deliberately reduced their hours due to awareness of these "income barriers" reached 4.08 million. It was analyzed that about 20% of non-regular employees are adjusting their working hours to account for the burden of taxes and social insurance.

Higher social insurance premium when exceeding 1.3 million yen ... Wage increases met with sharp reduction in working hours

In Japan, the term "income barrier" refers to the income range in which tax or social insurance costs rise, essentially reducing the real income gains from additional work. These barriers generally fall into two categories: the "taxation barrier," where taxes begin or deductions change at certain income levels, and the "social insurance barrier," where individuals become directly responsible for social insurance premiums. The key thresholds for social insurance have traditionally been 1.06 million yen and 1.3 million yen per year.

Once these thresholds are crossed, deduction benefits disappear and insurance premiums spike, often resulting in the "reverse effect" where working more can actually decrease take-home pay. As a result, many part-time workers have repeatedly cut back on hours toward the end of the year to avoid surpassing these limits. In response, the government and the ruling party plan to raise the income level at which income tax begins to be charged to 1.78 million yen, and starting from October 1, will also abolish the "1.06 million yen barrier" related to social insurance enrollment.

Japan stopped issuing health insurance cards in paper and plastic forms starting from December 2, 2024, and fully transitioned to the My Number Card-linked health insurance card system called MyNa Hokensho (MyNa Insurance Card), which integrates the health insurance card with Japan's national identification card. The Japan News

However, the annual income threshold of 1.3 million yen, which determines eligibility as a dependent for a spouse’s social insurance, remains unchanged. If a worker’s annual income exceeds this amount, they lose dependent status and may have to pay their own insurance premiums. In addition, at workplaces of a certain size, employees may be required to join social insurance if they work more than 20 hours per week, regardless of their income.

The problem is that as the minimum wage increases, these thresholds are reached more quickly. For the 2026 fiscal year, the nation’s weighted average minimum wage in Japan is 1,177 yen per hour (approximately 13,000 KRW), up 56 yen from the previous year. The new minimum wage is set to apply sequentially by region from October 1 to December 2. As a result, some part-time workers are reducing their working hours in proportion to the wage increase, in order not to exceed income thresholds.

Chronic labor shortages in Japan: Recruitment concerns intensify for restaurant industry

Statistics indicate this trend as well. According to the Ministry of Health, Labour and Welfare, in the previous year, the average actual monthly working hours per short-hour worker was 79.1 hours, a 7% decrease from 2019. Meanwhile, the number of short-hour workers increased by 5% to 16.14 million during the same period, but the total labor supply actually fell by 2%.

Part-time jobs available in Tokyo, Japan. Job postings with hourly wages around 1,250 to 1,300 yen. Nihonarubaito.com

Retail, restaurant, and food service industries—which have a high dependence on part-time labor—are feeling increased pressure. Of the 4.02 million job postings for non-regular positions made public from January to September this year, 7.7% included statements such as "working hours can be adjusted to maintain dependent status." In the supermarket sector in particular, such postings accounted for 22.7%. Some companies have even set "less than 20 hours per week" as a hiring condition.

This is also becoming a growing concern for the Japanese government. While minimum wage hikes are intended to help households cope with rising prices and to boost household incomes, the existing tax and social insurance rules mean some workers are instead cutting back their hours. This is especially worrisome as Japan struggles with chronic labor shortages due to low birthrates and an aging population, leading to concerns that reduced part-time hours could further exacerbate hiring difficulties in industries such as retail and food service that heavily rely on such workers.

This content was produced with the assistance of AI translation services.