An analysis by Japan’s Cabinet Office using private big data has revealed a pronounced trend among women to reduce their working hours to keep their annual income below ¥1.03 million, even if their hourly wages increase. This finding provides data-backed evidence of the phenomenon known as “working restraint,” where people intentionally limit their earnings to avoid crossing the “tax threshold.”
During the last regular Diet session, the tax threshold was increased from ¥1.03 million to ¥1.6 million. The Cabinet Office analyzed anonymized wage and work hour data of about 68,000 hourly workers from a private payroll service provider, covering the years 2015 to 2023, to explore income distribution and work adjustments among these workers before the tax reform.
The analysis showed that for women, the proportion of those earning up to ¥1.03 million gradually increases but sharply declines beyond that point, demonstrating the so-called “income wall.” This trend was not similarly observed among men.
Further examination of women whose hourly wage increased between 2021 and 2022 found that among 619 women with an annual income between ¥1 million and ¥1.03 million in 2021, 424 (68%) reduced their working hours even after receiving a wage increase.
Although surpassing the ¥1.03 million mark does not decrease take-home pay due to taxes only being applied to the excess income, many companies enforce a spouse income cap of ¥1.03 million for spousal allowances. The Cabinet Office suggests that this corporate policy might contribute to women limiting their work to stay beneath the threshold.
by MagazineKey4532