Addressing a demographic time bomb

Japan is facing a demographic time bomb and is looking at innovative ways of confronting the issue and retaining older workers in the labour market.

Tokyo Diet Building


Japan is known for its ageing population and skills shortages as well as for having one of the lowest birth rates in the world. All this has combined to create a demographic time bomb. Other countries which are facing similar demographic changes, such as the UK are watching closely to see how Japan copes, particularly with regard to its older workforce.

In April the government is set to approve plans to raise the optional age for drawing the state pension to over 70 and will consider gradually raising the mandatory retirement age to 65 from 60 for some 3.4 million civil servants. A bill going through the Diet [Japanese parliament] this year and expected to come into effect in 2022, offers several employment options for employers to retain older workers, such as giving them community service activities, subcontracting operations to businesses launched by older workers, delaying the retirement age and offering continued employment after retirement.

The bill also calls for altering the benefits system around second jobs. We spoke to Philippe Debroux, Professor of International Management at Soka University, about the situation in Japan. What is driving change in attitudes to older workers in Japan?

Professor Debroux: The demographic trends are extremely clear in Japan. The Japanese population will age considerably in the next years. That won’t change and there are opportunities and threats.

Ww: How have recent policy changes impacted employers?

PD: Legislation has been changed to put pressure on employers not to use older workers as cheap labour. Older workers are allowed to retire between 60 and 70 [however, they only start to receive their full monthly payments if they retire at age 65 or older]. In the past they could be rehired at lower rates of pay and discarded. Now employers have to retain older workers who want to keep working until they turn 65 [and the government is reported to be likely to encourage retention up to the age of 70 over the next year].

Ww: What are the big issues for employers around the ageing workforce?

PD: One issue is retraining. Companies need to develop a proper retraining strategy. Many Japanese companies do not train people over 50. Now that they have to retain employees until they are 65 they need to think about that so that they can continue to be useful to the organisation. IT literacy is increasingly important. There are many diligent workers over 50, but their skills may be obsolete. Nevertheless they have a lot to offer in terms of experience.

Moreover, some jobs are changing so fast and all employees need to keep up. Many companies and the government are investing in retraining, but there is a worry on the part of employers that their workers may leave if they provide retraining. It’s a sellers’ market for labour for younger workers and for many skilled older workers. Japanese companies have to be careful. If they do not provide good second career opportunities to their best older workers they will leave.

There is a lot of movement within larger companies, but more than 85% of the workforce in Japan works for an SME where this is more problematic. For many SMEs younger workers in a sellers’ market can be expensive so they need to retain older workers by thinking more about the package they offer, such as housing support and fringe welfare benefits, including health-related ones or help for carers. Because of the cost of the social care system in Japan, the government is trying to encourage families to take a bigger role in caring so caring responsibilities are becoming a bigger issue for employers and they need to accommodate these creatively.

There’s also the question of valuing older workers generally and ensuring they have fulfilling jobs. Older workers have traditionally been given useless activities to do to supplement their low pensions.

Ww: Is flexible working an option for older workers?

PD: Flexible working, including gradual retirement, are also offered, but it can be a double-edged sword when it comes to career progression and pay. There is give and take, for instance, one solution is to reduce or stop overtime for older workers so they can continue to work full time.

Ww: What about attitudes to older workers?

PD: Age discrimination, like gender discrimination, used to be casually accepted in Japan.  Many older workers were being paid much less than other workers. As there was a gap between when people were able to retire and when they could collect their public pension, they were often rehired on lower rates. However, the law has changed in line with ILO recommendations that employers must pay the same salary for equivalent jobs.

Ww: Has there been any negative impact from increasing investment in older workers?

PD: Many people in Japan think too many resources are being devoted to older people and that the young are being neglected, many of whom have never had a permanent job and feel a sense of drift. That is a serious problem. A number of employers are doing a lot of good work bringing together older and younger workers. There is an emphasis on intergenerational teams and an interdisciplinary approach, linking local authorities, chambers of commerce and employers comes in. The Japanese Institute for Labour Policy and Training, for instance, has a lot of resources on all aspects of people’s working lives, including policy around older workers. It’s about making the most of everyone.

*Picture credit: Wikimedia commons. Diet building by Douglas Paul Perkins.

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