Older workers in Japan

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Japan is a special case in more ways than one – most of them beyond the scope of this report.


For present purposes, we may note that population ageing has proceeded farther and faster in Japan than anywhere else in the world. By 2025, one-quarter of the population will be aged 65 years and over.


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The prospect of a rapidly ageing workforce led to a succession of policy decisions and legislative action from the 1970s onwards. These are based on three ‘pillars’. The first aims to encourage companies to retain workers until age 65, through subsidies, grants and loans, as well as statutory changes in the retirement age. The second includes measures to promote reemployment of older workers, using a range of incentives. The third pillar comprises advisory services and job programs, including the well-known Silver Human Resource Centres.(37) Since the 1970s, one of the chief instruments of those policies was legislation lifting the effective age of retirement. Japan is famous for its ‘tacit contract’ of lifetime employment, which actually meant retirement at age 55 (the Teinen system). Teinen does not necessarily mean exit from the labour force. Some retired employees are taken on by the same company with a fixed-term contract, and some are hired by subsidiaries of their former employer. Others find their own jobs.


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Survey research indicates that the majority of men would prefer to work until 65.


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The need to extend the Teinen age led to a government decision in 1973 to subsidise the raising of the age limit to 60. This was followed by a number of other legislative measures:


; ; ; ; ; ; ; ; ; quotas, introduced in 1977, requiring companies to increase their proportion of employees aged 55 and over to 6 per cent;


; ; ; ; ; ; ; ; ; grants for ‘employment stabilisation’, introduced in 1978, offering subsidies to employers who hired persons aged 55-64 through the labour exchange system;


; ; ; ; ; ; ; ; ; the Employment Stabilisation or Teinen Act (full title, The Law Concerning Stabilisation of Employment of Older Persons), passed in 1986. As a result, all large firms, or 90 per cent of those with 30 or more employees, now have a Teinen age of 60;


; ; ; ; ; ; ; ; ; the Teinen Act was amended in 1990 to encourage employers to continue workers in employment until age 65, a further amendment in 1994 gave statutory force to a Teinen age of 60;


; ; ; ; ; ; ; ; ; the Employment Insurance Law was amended in 1994 to top up wages with a allowance for older persons remaining in work. Workers aged between 60 and 64 are eligible, provided they are earning no more than 64 per cent of their pre-Teinen wage. Below 64 per cent, they receive a top-up of 25 per cent; at levels above this, the allowance is progressively reduced and disappears when the new wage exceeds 85 per cent of the pre-Teinen level. Instead of the previous system of subsidies paid to employers, this allowance is paid directly to the worker. By 1998, one-third of employers were implementing the scheme; and


; ; ; ; ; ; ; ; ; the Employees Pension Law was amended in 1995, providing for a significant easing of the earnings limit imposed on pensioners.


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Pension reforms have accompanied the re-employment incentives described above. Apart from easing the earning limit, pensionable age has been raised. By 2013, the pensionable age for men will reach 65, and for women by 2018. Partial pensions will also be available for persons aged 60-64. The logic behind these changes is to provide an attractive income for this age group, made up of wages, the partial pension, and the top-up allowance.


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The Actions of Employers

Japanese public policy typically requires co-operation between government, the corporate sector, and the public. The various schemes described above involve contributions from government, employers, and workers. Employers have not been enthusiastic in their response to the raising of the Teinen age. Large firms responded by resorting to the Shukko system, where the company retains workers but sends them to work for a subsidiary. Research indicates that the Shukko system has been applied to a large number of workers in their 50s.


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Workers retained within the principal firm were removed from the established system of pay and promotion once they reached 55, involving substantial cuts in pay. Almost all large corporations have refused to extend employment beyond Teinen age. Instead, they have instituted ‘reemployment schemes’ which provide jobs on an annual contract basis, up to age 63 or, in some cases, 65. A well-known case is that of the Matsushita electrical manufacturing company, whose re-employment scheme has been criticised as a publicly subsidised low pay work system.


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Job Programs and Advisory Services

The best known of these is the Silver Human Resource Centres, which offer temporary employment for retired persons aged 60 and over. The centres aim to provide a combination of employment, a small income, and community involvement. There are currently about 1300 centres, whose total membership was 540,000 in 1998. Their income in 1998 was approximately 200 billion yen (approximately $A2 billion).


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Assistance is also provided by the Association of Employment Development for Senior Citizens, which has a head office in Tokyo and branch offices in each of Japan’s 47 prefectures. They are approved by the Ministry of Labour as providers of advisory services on employment opportunities, job development, and preparation for retirement.


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