Extending the retirement age of civil servants

The National Personnel Authority’s latest proposal to extend the mandatory retirement age for national government workers to 65 from the current 60 is in step with the government’s push to keep older workers in the labor market — to make up for the accelerating manpower shortage as the nation’s population rapidly ages and declines and to help shore up the sustainability of social security programs. The move is also reportedly intended to prod more private sector companies as well as local governments to follow suit.

A similar past attempt by the government floundered after it was criticized for favoring only public sector workers. Given the demographic challenges confronting the nation, the need to encourage more senior workers to stay in the labor force — and under better terms — is even more pressing today. The program should be pursued along with other policy steps so more people can keep working after they turn 60 in decent conditions in both the private and public sectors.

The government said last year it would weigh extending the retirement age of civil servants, and the personnel authority’s proposal made to the Diet and the Cabinet in early August follows up on that decision. A plan weighed by the government calls for extending the retirement age by one year every three years beginning in fiscal 2021, until it is raised to 65 in 2033. To prevent a sharp increase in the government’s total manpower expenses, the personnel authority’s draft says the salary of workers who have turned 60 will be cut to roughly 70 percent of what they had previously earned.

The previous attempt was made in 2011, when the personnel authority called for extending the retirement age for national government workers by a year every three years beginning in 2013, as the age at which people become eligible for pension benefits was raised. At that time, however, most private sector companies kept their retirement age at 60 — beyond which workers were re-employed on different terms and often at sharply reduced wages. The plan was given up after it came under fire for giving only government workers a guarantee that they would maintain their employment status.

As it is, the government rehires civil servants who reach retirement age at terms similar to the private sector. The number of such central government workers rose from some 7,000 in 2013 to 13,000 this year. Since the number of public servants cannot be increased easily, however, 65 percent of such workers are hired at reduced hours — from 15 to 31 hours a week. The personnel authority says that giving rehired workers this kind of status could dampen their morale and affect the efficiency of administrative services. It is calling for extending the retirement age so these older workers can maintain their full-time status. The government also hopes that extending the retirement age of civil servants will encourage more private sector companies to follow suit.

After the revised law for employment stability of elderly people — which obliged companies to provide employment for all workers until they reach 65 if that is what they want — took effect in 2013, some private sector firms have indeed begun to extend their mandatory retirement age. Such moves are expanding today as more companies face difficulties in securing the younger generation manpower they need as the labor shortage intensifies with the economy’s recovery.

Nonetheless, such companies continue to be in the minority. According to a survey carried out by the Health, Labor and Welfare Ministry, only 17 percent of firms had extended their retirement age to 65 as of June last year, while another 2 percent have abolished the mandatory retirement age system altogether. More than 80 percent of the firms rehire their workers on different terms when they turn 60. They do this instead of extending the retirement age since that would push up their manpower expenses. Many of the workers who are rehired at these firms after turning 60 see their wages reduced to 50 to 60 percent of what they used to earn.

But for either the private or public sector, the coming manpower shortage will be real. Government projections show that the nation’s productive age population between 15 and 64 will decline from 77.28 million in 2015 to 45.29 million in 2065 — a roughly 40 percent decline in a span of 50 years. Both sectors need to rely on a greater number of older workers staying in the labor force longer — and that will require securing adequate working conditions and statuses for older workers. Extending the retirement age for government workers should be pursued in ways that accelerate similar moves among private sector companies.