Aging and Retirement of the Labor Force
Japan's population is aging. During the 1950s, the
of the population in the sixty-five-and-over group
at around 5 percent. Throughout subsequent decades,
age-group expanded, and by 1989 it had grown to 11.6
percent of the
population. It was expected to reach 16.9 percent by 2000
almost 25.2 percent by 2020
, ch. 2).
most outstanding feature of this trend was the speed with
was occurring in comparison to trends in other
nations. In the United States, expansion of the
age-group from 7 percent to 14 percent took seventy-five
Britain and the Federal Republic of Germany (West
expansion took forty-five years. The same expansion in
expected to take only twenty-six years.
As Japan's population aged, so did its work force. In
about 20 percent of the work force was made up of workers
fifty-five and over (see
table 18, Appendix). The Ministry
predicted that by 2000 about 24 percent of the working
(almost one in four workers) would be in this age-group.
demographic shift was expected to bring about both
and microeconomic problems. At the national level, Japan
trouble financing the pension system. At the corporate
problems will include growing personnel costs and the
senior positions. If such problems become severe,
be forced to develop countermeasures.
In most Japanese companies, salaries rise with worker
Because younger workers are paid less, they are more
employers, and the difficulty in finding employment
age. This pattern is evidenced by the unemployment rates
different age-groups and by the number of applicants per
vacancy for each age-group in openings handled by public
offices. As the Japanese population ages, such trends may
Most Japanese companies require that employees retire
reaching a specified age. During most of the postwar
age was fifty-five. Because government social security
normally begins at age sixty, workers are forced to find
reemployment to fill the five-year gap. However, in 1986
passed the Law Concerning the Stabilization of Employment
Elderly People to provide various incentives for firms to
their retirement age to sixty. Many Japanese companies
retirement age they had set, partly in response to this
legislation. And despite mandatory retirement policies,
Japanese companies allow their employees to continue
the age of sixty--although generally at reduced wages.
sixty continue to work varied: to supplement inadequate
incomes, to give meaning to their lives, or to keep in
As Japan's population ages, the financial health of the
pension plan deteriorates. To avoid massive increases in
the government reformed the system in 1986 by cutting
levels and raising the plan's specified age at which
from sixty to sixty-five. Under the revised system,
paid in equal share by employer and employee were expected
equivalent to about 30 percent of wages, as opposed to 40
of wages under the old system. However, problems now arose
securing employment opportunities for the
sixty-to-sixty-five agegroup .
In 1990 some 90 percent of companies paid retirement
to their employees in the form of lump-sum payments and
Some companies based the payment amount on the employee's
while others used formulas independent of base pay.
system was designed to reward long service, payment rose
progressively with the number of years worked.
Data as of January 1994