How employer transportation allowances helped create commuter hell

October 14th, 2014 by Philip Brasor & Masako Tsubuku

Rush hour at Yurakucho Station

Rush hour at Yurakucho Station. By nesnad [CC-BY-3.0], via Wikimedia Commons

According to the Ministry of Health, Labor and Welfare, about 86 percent of Japanese companies pay their employees’ tsukin teate, or “commuting allowance.” To many Japanese the high rate will probably be less surprising than the fact that not all companies pay it. It’s a common misconception that the allowance is somehow a legal mandate, but it isn’t.

Employers don’t have to pay their workers’ transportation expenses, but most do. In fact, as the so-called lifetime employment system that was so central to Japan’s postwar economic growth has slowly been abandoned over the past two decades, more companies have opted to either cut back on transportation allowances by limiting the amounts, or eliminating them altogether. The above figure is for regular full-time employees, and the growing trend among employers now is to hire non-regular employees, either as temps or contract workers.

But while transportation expenses are not legally mandated, they are regulated. Companies can write them off as business expenses, but only up to ¥100,000 a month per employee. If an employee’s commuting costs exceed ¥100,000 in a month, the excess is subject to tax as if it were income.

That’s a lot of money to spend on commuting, even in Japan, and, for sure, the vast majority don’t spend that much. But inadvertently or not, the tsukin teate system has contributed directly to the concentration of businesses in major cities, thus exacerbating the problem of long commutes and over-crowded public transportation.

If employees had to pay their own transportation expenses, which is the case in most developed countries, they would naturally find work that is as close to their homes as possible or move their residence to within a comfortable commuting distance of their work place.

In other words, they would balance their job particulars — working circumstances and salaries — with commuting conditions — length and cost. In any case, there would likely not be the situation that you now have in the Tokyo Metropolitan Area, where commutes can take two hours one way on trains that are often over 150 percent capacity.

In its series commemorating the 50th anniversary of the Shinkansen “bullet train,” Tokyo Shimbun described how the iconic high-speed express gave rise to a “new way of working.” One article profiles a man named Akira Wachi, who has commuted from his home in Numazu, Shizuoka Prefecture, to his job in the Osaki area of Tokyo for 26 years via Shinkansen. The trip takes 90 minutes one-way. In 1976, his company, which happens to make electrical devices used in Shinkansen, transferred him from Tokyo to its Numazu factory. Six years later, thinking he would not be transferred again, he built a house. He was 32 years old. However, six years after that he was transferred, back to the company’s headquarters in Tokyo. With two children in elementary school he didn’t want to move his family again so he applied for permission to commute by Shinkansen. His request was approved.

His commute is now ¥87,600 a month, and his company bears the entire cost. (Reserved seats, like Green Cars, are not paid for by tsukin teate) In fact, he is not the only employee who commutes by Shinkansen. There are 112 other people in the head office who do so as well. The cost to the company is obviously formidable, and surely adds to the cost of its products. The various JR companies that operate the Shinkansen have encouraged commutes by adding LAN capabilities on its trains. One man, who commutes every day from his home in Shizuoka to Tokyo, says he gets a lot of work done on the train even before he arrives at his office.

The article goes on to point out that during the bubble era, when property values rose greatly, salarymen built homes farther from city centers, and could do so because their companies paid for their commutes, so in a sense tsukin teate also contributed to skyrocketing property values. As more Shinkansen lines were built, the train was used more and more as a means of commuting. Takasaki Station in Gunma, which is one hour and 11 minutes from Tokyo Station by Shinkansen, sells about 5,700 Shinkansen commuter passes per month.

In order to attract new residents to its area, the city of Saku in Nagano Prefecture offers a commuting subsidy: up to ¥25,000 a month if the new resident’s employer does not pay the full amount of the commute via the Nagano Shinkansen, which stops at Saku-Daira station. Since the monthly commuting cost from Saku-Daira to Tokyo is ¥132,830, even if the employee’s company pays the full ¥100,000, the employee will have to pay ¥7,830 a month out of pocket. And it isn’t just Tokyo. Some cities located along the relatively new Kyushu Shinkansen offer subsidies to commuters.

It’s notable that the Kyushu Shinkansen was mainly built with tourism in mind and is currently operating in the red, which brings up another by-product of the tsukin teate, which is the enormous revenues of railways in the major industrial corridor between Tokyo and Osaka. JR Tokai, which operates the highly profitable Tokaido Shinkansen between those two cities, says that revenue from monthly and multi-monthly passes increased eleven-fold between 1987, when Japan National Railways was privatized, and 2013.

On the plus side these profits have led to even better service in this corridor, but because all the money is concentrated there, regional railways are going out of business, forcing even more people to move to the cities. Many will say that’s simply the way the market works. Exactly.

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10 Responses

  1. I guess the writer has never been to china or other asian countries. millions of asians are not paid travel alloawances and STILL lives at least 1 hour from their office.

  2. The point is not so much the length of the commute, but the cost. The fact is, most of the workers who commute more than an hour to Tokyo each way would probably not be able to afford to pay for their own transportation. Public transportation in China and other Asian countries is much cheaper than Japan’s.

  3. Cost as a percentage of income, not just cost, would enable us to determine which country’s commute is more or less expensive.

  4. Yeah, long commutes are normal when you have high population density, and certainly aren’t unique to Japan.

  5. If more workers lived close to downtown, then housing costs would increase. Companies would need to provide housing allowances or pay a higher salary. This is a zero-sum situation and that money will come from employers and go somewhere else. Given that, isn’t it preferable for the money to contribute to investment in public infrastructure, rather than the pockets of real estate developers? There is a reason Japan has the best train system in the world: continued investment in that system.

  6. Don’t people live far from work because housing costs become some much higher as you get closer to inner Tokyo, where everyone works?

  7. There is no basis for the cause-and-effect described. In Denmark you get a tax deduction if you live far from work – since it depends on the distance and not your actual travel costs, it is or at least has been possible to make a net profit by living far from your job. Very, very few people moved for that reason – most people here will be dissatisfied if they need more than 20-30 minutes to get to work, which drives up rents in the center of big cities and takes people away from smaller cities.

    As for the anecdotal evidence, if an experienced employee is any good at all, 87600 yen per month is a very small price to pay to keep him – and an extra hour’s commute a day a small price for him to pay not to have to move his family around. It’s not like he’d suddenly have no commute time at all, just because he moved to Tokyo.

    The main reason public transport is so crowded in Japan compared with some other places, is probably that people use it – in the US for example, people are much more likely to use a car for their daily commute.

  8. I am a regular reader and appreciate your blog but I totally failed to understand your point: the balance between rent and commuting expenses is unlikely to have given a different result. Commuting expenses paid by companies probably resulted in a larger dispersion of housing and therefore less increase in rent (because of lesser concentration). Cheaper commuting expenses will most likely be offset by the higher rent. Anyway I don’t see any basis for what you assert.

  9. I really don’t get the link between the commuting allowances and the negative effects you associate with it. If anything, if employees have to bear the full cost of the commuting they would be more likely to move close to where the jobs are, exacerbating the ‘skyrocketing property values’ in the areas with the most jobs. The fact that it’s affordable to commute, may lead to crowded trains, but is actually a fantastic way of making sure that more rural areas or areas without as many jobs are not left deserted.
    I would suggest having a look at most European countries or the US where desertification of areas with few jobs and concentration around areas with a high number of jobs create all sorts of problems like ‘skyrocketing property values’, high criminality, pollution, etc.

  10. This website is really helpful. Thanks for the news.

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