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