NCPA - National Center for Policy Analysis


June 28, 2005

Forget retirement, life just starts at 60; at least that is what Japan is claiming. In response to a problem that is sweeping the world -- an aging population combined with a shrinking work force -- Japan's solution is hiring elderly people.

Unlike the United States, which relies on large-scale immigration to increase the workforce, Japan is enticing the elderly to work longer before receiving retirement benefits. By pushing back retirement, they are, in effect, making old age start later.

If Japan's plan succeeds, other nations, such as Germany and Italy, whose elderly population will increase in the upcoming years, might have a new policy tool to alleviate their labor shortages. Already, there are some hopeful signs:

  • Even though the official retirement age is 60, many Japanese are enthusiastic about working longer.
  • The International Labor Organization says that 71 percent of Japanese men ages 60 to 64 work, compared to 57 percent of American men and 17 percent of Frenchmen.
  • According to a 2001 Japanese government report, 72 percent said that their ideal retirement age was either "about 65 or 70," while Americans, Germans and Swedes said "about 60 or 65."

Japan's declining work force comes from two trends linked to economic development: better diet and health care and a decrease in birth rates. Keeping the elderly at work could help maintain Japan's work force size since the low birth rate means that Japanese in their 20s will decline by 3.2 million over the next decade.

The Japanese government is hoping that the elderly will help save its increasingly burdened pension system from going bust, even though early signs suggest that a majority of large corporations are reluctant to hire, or rehire, older people. But a recently passed law requires that companies raise their retirement age to 65 and rehire their retiring workers by 2013.

Source: Sebastian Moffett, "Fast-Aging Japan Keeps Its Elders On the Job Longer," Wall Street Journal, June 15, 2005.

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