The government’s decision to urge companies to secure employment opportunities for their workers up to the age of 70 aims to make up for Japan’s tightening manpower shortage and help ease the pressure on the social security system brought on by the rapidly aging and declining population. It makes sense to enable the growing ranks of senior citizens to remain in the labor market if they are healthy and willing enough to keep working. At the same time, various challenges lie ahead to keep senior citizens motivated to work longer and under decent conditions.

The law on promoting stable employment of the elderly makes it mandatory for companies to provide jobs for employees if they wish to keep working until they turn 65 — the age at which people in principle become eligible for public pension benefits — by either abolishing or extending the mandatory retirement age — 60 at most Japanese firms — or by rehiring them under a different status after they retire.

The government’s plan, revealed at a recent meeting of the Council on Investment for the Future, urges employers to make efforts to extend job opportunities for workers until they turn 70 through a range of options, including the abolition or extension of the retirement age, rehiring after retirement, support in finding new jobs at other firms, freelance contracts and support for entrepreneurship. There will be no penalties for companies that fail to take such steps, but the government plans to offer financial incentives for firms that are proactive in making such efforts. After amending the law as early as next year, the government intends to assess the progress and consider the introduction of mandatory measures in the future.

The number of people 65 or older on company payrolls has been increasing in recent years — just as they account for a greater portion of the population while the number of people in the primary working age keeps falling. According to a 2018 survey by the Internal Affairs and Communications Ministry, workers 65 or older numbered 8.62 million, or 12 percent of the 66.64 million people 15 or older on payrolls. Today, 24.3 percent of senior citizens have jobs. Meanwhile, the population of people aged 15 to 64 has fallen from around 80 million in 2012 to 75 million today. Greater participation of the elderly and women in the labor market has helped make up for the declining pool of younger workers in recent years.

Still, employers that have abolished or extended their mandatory retirement age remain a minority. A Health, Labor and Welfare Ministry research showed that 80 percent of companies have chosen to rehire workers after they turned 60. The workers are generally hired on new contracts that offer significantly reduced wages.

Ahead of the introduction of the “equal work, equal pay” rules in the government’s work-style reform drive, some elderly workers on such contracts have taken legal action against their employers, charging that their greatly reduced wages are irrational since they engage in essentially the same work they were doing previously. To keep the senior citizens motivated to work longer, the challenge will be to improve their working conditions in ways that match their capability, experience and performance. On the other hand, caution remains strong among businesses against moves to uniformly require them to keep elderly workers on their payrolls, which would increase their manpower expenses.

Even as the government seeks to keep workers employed to the age of 70, it has indicated that it will not raise the age at which people become eligible for public pension benefits from the current 65. At the same time, it plans to expand the range of ages at which people can start receiving the benefits — with a view to encouraging people to begin receiving them at a more advanced age. Currently, people can choose when to start receiving the benefits between the ages of 60 and 70. The earlier they start getting the benefits before 65, the lower the monthly payments become, and the opposite if they choose to begin receiving the benefits after they have turned 65 — although few people choose the latter option.

The government reportedly plans to raise the maximum age at which people can start receiving pension payments — with even larger monthly benefits — beyond 70 and possibly to 75. Reform of the public pension system will need to remain on the agenda to keep the social security system sustainable as the population grays and shrinks.

Medical experts say that today’s elderly people are much more physically fit than earlier generations — so much so that some of them suggest that the definition of “elderly” should be changed to those 75 or older. It is also often said that elderly people’s capability and willingness to work varies greatly among individuals. What’s needed is to secure employment opportunities that meet the circumstances and needs of each senior citizen and can keep them motivated to work.

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