OLD HANDS, NOT IDLE HANDS:
Topsy-Turvy Demographics Create Job Market for Aged

September 4, 1997

Other countries may seek to lower the retirement age, but Japan is now in the throes of discussing whether to move it back, from 60 to 65. This is what is proposed in the Ministry of Labor's recently released fiscal 1997 white paper, and in the recommendations of a Ministry panel of experts. In 2015, more than one quarter of all Japanese are expected to be 65 or over. This rate of graying is putting great pressure on pension finances. So the age of eligibility for national pension payments is being raised to 65 in 2013. This raises many questions, such as how corporate wage structures and benefits will be affected. But the issue is complex and must be addressed. There is a need to seek national consensus as soon as possible.

Pace of Graying Picks Up
Most companies retire employees at 60. This age was the subject of legislation in 1994 and will become mandatory in April 1998. According to Labor Ministry statistics, only 6.6% of companies had made 65 their retirement age by 1996. The proportion does not exceed 20% even counting companies that effectively keep people on to 65 by rehiring them or making them part-timers or other non-regular staff. At the same time, the age at which men are eligible to receive employees' pensions will be raised gradually from the current 60 to 61 in fiscal 2001 and to 65 in fiscal 2013. In other words, employees who leave the workforce at 60 will be left without an income until the first pension payday arrives.

Another concern is unemployment. It is estimated that the population aged 60-64 will rise by about 1 million to 8.6 million in 2004, as those born in the first baby boom immediately after World War II reach old age. If the retirement age continues to be 60, the generation coming up to that age between 2005 and 2010 could face the prospect of mass unemployment while still needing to work. These are the dilemmas that prompted the labor white paper and the ministry panel to effectively make calls for changes in the way Japanese society operates.

But there is another question: Will the younger generation be able to meet the swelling costs of future pension provision singlehandedly? The Ministry of Health and Welfare calculates that with the increase in the number of aged, pension contributions will amount to 27% of monthly wage packets by 2015, compared with the current 17.35% (in both sums, the employer pays half the costs). If those drawing the pensions worked on to 65, footing the bill themselves, it would be a major prop for the creaking pension-finance system.

Tough Environment
In reality, the employment environment for the aged is bleak. According to the Management and Coordination Agency, 6.3% of those aged 60-64 were without any form of employment in 1996, compared with the national average of 3.3%. Since the collapse of the "bubble" economy, companies have been restructuring to raise efficiency, making employee performance a greater criterion, and reforming their lifetime-employment and seniority systems.

In particular, more companies are taking aim at the costliest end of their payrolls by introducing early-retirement incentives. According to a Labor Ministry survey of around 12,000 employers, 33.5% of retirees aged 50 or over had left before retirement age in 1996, and 9.3% had taken advantage of early-retirement packages, twice as many as in the previous year. The proportion of people working up to retirement age is declining, not rising. Given these realities, companies in competitive global markets cannot but take a dim view of keeping people on until 65. As long as the majority stick with the seniority-based pay system, managers will be unenthusiastic and it will be difficult to move back the retirement age.

Old Dogs, Old Tricks
Nonetheless, major electrical-machinery, automotive and other unions have already begun pressing for retirement at 65. For there is another factor in the equation: Shortages of younger workers are also expected to become a major future headache. It is becoming a quandary corporate management can no longer sidestep. And some companies no longer are. A major railway company in Nagoya began letting workers stay on to 65 three years ago; of a total workforce of some 8,000, 182 employees are 60 or over. Their incomes do drop at 60, but only to 80% of annual wages at 59. Many are able to remain at their posts--the company has one 63-year-old stationmaster. And a building maintenance company headquartered in Osaka takes people on at 60 and gives them the option of retirement at 70. The entire workforce consists of senior citizens. It attracts salarymen who have been put out to graze but still wish to be employed. Established seven years ago with 11 employees, it now has 260 workers on its rolls.

In its white paper, the Labor Ministry points out that it would be a waste not to use the expertise, skills and experience that older people have built up over the years, especially when they are themselves keen to work. It is said that it doesn't much matter how old you are when doing white-collar work. Senior citizens can be high value-added human resources if they bring specialized knowledge.

But they also bring with them health problems. Not all of them want to work on, and many are too frail to work comfortably under pre-retirement conditions. For this reason, it is also becoming necessary to create working environments which take account of advanced employee age, with flexible regimes allowing, for example, shorter working hours, or work-place attendance every other day. And corporate employers could make things easier by changing traditional wage, retirement-allowance, and other structures.

Japan faces a period of acute labor shortage. Mobilization of senior citizens is an issue that is going to affect all of society. The key to coping with extreme demographic imbalance is likely to be the creation of an environment in which the experience and expertise of the aged can be fruitfully brought to bear.

Ministry of Foreign Affairs

Japan Information Network