Editorials

Keeping elderly workers in the labor force longer

As part of the efforts for social security reforms in an “era of 100-year life” that were pledged by Prime Minister Shinzo Abe during the Liberal Democratic Party presidential race, the government is reportedly set to launch discussions for promoting the employment of people aged 65 and up. Currently businesses are required to continue to provide employment for workers who have passed the mandatory retirement age — 60 at most companies — until they reach 65, the age at which they in principle become eligible to receive public pension benefits if they so wish.

As the nation’s aging and declining population rapidly reduces the pool of people in their so-called productive years between 15 and 64, it makes sense to allow elderly employees who are healthy enough to remain in the labor market to keep working, both to make up for the manpower shortage and to sustain a social security system that is under pressure from the nation’s demographic challenges. In fact, as people 65 and up have come to account for a record 28.1 percent of the population — and those 70 or older occupy more than 20 percent of the total for the first time — the number of people aged 65 and up with jobs (including company executives and self-employed people) has reached a record 8.07 million, or 12.4 percent of the labor force.

There are obstacles, however, that must be overcome to retain more senior citizens in the labor market. Even as they rely increasingly on senior citizens to fill their manpower needs, companies in general remain cautious toward expanding any obligations to retain them as they fear it would increase their manpower expenses. Instead of extending or abolishing the mandatory retirement age, most employers rehire post-retirement workers under new conditions — and often at greatly reduced pay. Lawsuits have been filed against the practice, with the plaintiffs charging that it runs counter to the “equal work, equal pay” principle since many re-hired elderly workers engage in the same work that they had been doing earlier. If indeed the nation is to encourage senior citizens to remain in the workforce longer, they should be given better employment conditions.

The government policy to promote the employment of senior citizens — the specifics of which will be determined by the discussions that are set to start next month — is in line with what the government said in the updated outline of its policy on the elderly unveiled earlier this year. The outline seeks to change the uniform definition of “senior citizens” as those who are age 65 and older — given that advances in medical technology and living standards are allowing people to remain healthy and active well into their advanced years — and enable people who are willing and fit to keep working irrespective of their age. Behind the move is the growing need to make up for the nation’s shrinking pool of younger workers and to sustain the social security system.

Also being contemplated is raising the optional age for receiving public pension benefits to 71 and older. Currently people begin receiving pensions at 65, but they can choose to receive their benefits at any time between the ages of 60 and 70. The later the starting date, the greater the monthly amount, but few people delay the start of receiving their pensions beyond the age of 65. Promoting the employment of those 65 or older could encourage more people to start receiving their pension benefits later in life. It’s hoped that increasing the number of elderly people who continue to work will contribute to the financial stability of the social security system.

Under the law on stabilizing the employment of elderly workers, companies are required to enable their workers to work until the age of 65 if they so wish — by either extending or abolishing the mandatory retirement age, or by re-hiring them on new conditions after they’ve reached retirement age.

According to a Health, Labor and Welfare Ministry probe, about 75 percent of the companies surveyed actually allowed all their employees to continue to work at least until they reached the age of 65, and 22 percent of the companies polled allowed their employees to continue to work at least until the age of 70. But nearly 80 percent of the employers have kept their mandatory retirement age at 60. Many of them hesitate to extend the retirement age of their regular full-time employees because that would lead to significant increases in manpower expenses.

To ease the business sector’s opposition to extending the obligation to retain elderly workers, the government will likely first consider beefing up subsidies for companies to promote the employment of elderly workers. But if society needs its senior citizens to stay active in the labor force for a longer period, an overhaul of the system for their employment should be carried out.