Prolonging working life in Japan: Issues and practices for elderly employment in an aging society

ABSTRACT

As a result of the rapidly aging society, Japan’s public policies and related academic research have sought to address issues related to the employment of older workers. However, these efforts do not sufficiently consider how human resources management practices might facilitate effective policies. In response, this study investigates both the challenges and the solutions that employers have adopted to deal with an aging workforce. In particular, the authors argue that practices developed mainly by smaller enterprises might offer insights for larger companies that attempt to support the employment of elderly workers. An empirical analysis of the human resources management practices employed by 27 Japanese companies provides novel insights into how companies can ensure the prolonged employment of older workers while also motivating their work performance.

KEYWORDS:

• Elderly workers
• elderly employment
• aging workforce
• human resources management practices
• Japanese companies

Introduction

Japan has been on the vanguard of rapidly aging societies for decades. As a result, Japanese companies have gained experience in employing older workers, and public policy measures have been developed to help older workers remain in the labour market. In 2016, 89.7% of people aged 55–59 years and 72.7% of those aged 60–64 years remained in the workforce, reflecting their strong desire to keep working, such that 71.9% of workers hope to continue working beyond the age of 60 years, 16.6% say they want to continue until 70 years, and 28.9% indicate they will work as long as they can (Cabinet Office, 2016).

Noting such trends, researchers have increasingly investigated issues related to the employment of elderly workers, though relatively little academic work details the practices that Japanese firms have adopted to support these employment extensions (Laville, 1998; Volkoff, Molinié, & Jolivet, 2000). Instead, research in gerontology, ergonomics, management, and work psychology domains details the impact of biological aging on occupational activity and describes how human resources management (HRM) policies might contribute to the work motivation of older workers, as well as the performance outcomes they achieve. We seek to extend this stream of literature by studying the specific case of HRM policies adopted by Japanese companies that have experience in employing older workers.

In this article, we begin by reviewing prior literature related to the employment of elderly workers in Japan. Next, we specify the empirical methodology and the characteristics of the sample of Japanese companies that we studied. We present the results by describing both employment practices and the necessary adjustments to working conditions. Our discussion section focuses on the conclusions that we can draw about the relationship between aging and working, as well as the solutions employers can implement to support their aging workers. We also consider how well large firms might adapt solutions developed by small- and medium-sized enterprises (SMEs) to their own HRM practices.

Literature review

Prolonging work life in Japan

Various government initiatives in Japan seek to promote the employment of elderly workers. As early as the 1960s, specific measures such as funding for training were implemented to help older workers remain in the labour market (Jaussaud & Martine, 2017; Kayanuma, 2010b). Specific quotas for senior workers also were imposed, such that in 1971, large firms were required to have 6% of their workforce over the age of 45 years, and in 1976, this quota extended to workers older than 55 years. However, the quota policy ended in 1986 with the passage of the Act Concerning Stabilization of Employment of Older Persons (ACSEOP) (kōnenreisha tō no koyō no antei tō ni kansuru hōritsu高年齢者等の雇用の安定等に関する法律). This legislation redesigned the framework for elderly employment; it encouraged firms to postpone any mandatory retirement age they imposed (teinen 定年) until their employees became eligible for public pension benefits, which was 60 years at that time. In the mid-1980s, most companies mandated retirement at age 55 years, which created a 5-year gap with the public pension eligibility age. A 1994 amendment to the ACSEOP prohibits firms from imposing mandatory retirement ages younger than 60 years. When the public pension eligibility age rose to 65 years (as detailed below), a 2004 amendment again obliged employers to employ workers until they reached this age. By 1 June 2006, companies had to adopt one of three options: raise their mandatory retirement age to 65 years, introduce a continued employment scheme for people up to 65 years while leaving the mandatory retirement age at 60 years, or abolish mandatory retirement (Conrad, Heindorf, & Waldenberger, 2008; Martine, 2012; Yanagizawa, 2016). Finally, a 2013 amendment to ACSEOP prevents employers from setting criteria for re-employment of employees younger than 65, meaning that they must continue to employ their workers in some capacity until age 65.

In particular, the pressures of the rapidly aging population on Japan’s public pension system led the government to implement three major reforms. In 1954, it gradually raised (between 1957 and 1973 for men and between 1987 and 1999 for women) the public pension (kokumin nenkin 国民年金) eligibility age from 55 to 60 years (Horie, 2008). In 1994, it further gradually raised (from 2001 to 2013 for men and to 2018 for women) the eligibility age for the first tier of public pensions to 65 years. This pension is not linked to workers’ status or income. Finally, in 2000, Japan raised the age at which workers can benefit from the second tier of public pensions to 65 years (rōrei kōsei nenkin no hōshū hirei bubun 老齢厚生年金の報酬比例部分; raised by 1 year every 3 years from 2013 for men and from 2018 for women). This second tier of public pension depends on employees’ income (Komamura, 2016; Martine, 2017).¹

Although Japan’s pension system provides decent benefits to those who have worked all their lives in large, stable companies (seishain正社員), employees working part-time or with temporary, frequently renewed contracts often do not fully benefit from this system, because employers are not always obliged to pay pension contributions for these workers; similarly, women who interrupt their professional activity to have children and then return to work do not receive the same level of benefits (Jaussaud, 2001; Martine, 2012). For workers then, the most influential motive for prolonging their work life is economic (72.3% of 60–64-year-olds cite this reason), followed by social exchange (21.9%) and health (13.3%) (Japan Institute for Labour Policy and Training, 2010). Among 65–69-year-olds, 56.1% cite economic reasons, followed by social exchange (25%) and health (19.7%).

The encouraging work and policy environment, combined with economic necessity, thus can explain why Japanese workers desire to work longer as well as the high rate of employment among 60–64-year-olds (72.2%). However, these high labour participation rates do not mean that all elderly Japanese workers benefit from advantageous working conditions. As economic and labour historians caution, elderly workers continue to suffer various kinds of discrimination in employment (Martine, 2017; Sato, 1999; Yanagizawa, 2016).

Employment discrimination against elderly workers

Since the 1950s, elderly workers faced various employment difficulties in Japan (Kayanuma, 2010b). During the high growth period for the Japanese economy (which lasted from 1955 to 1973) firms mainly sought younger workers who were ready to be trained. In the 1960s, approximately 5 job offers were available for each candidate under 19 years of age, one for each candidate under 50 years of age, and 0.2 for each candidate aged between 50 and 56 years (Japan Institute for Labour Policy and Training, 2005). After two oil shocks (1973 and 1979), Japanese firms also pursued various mechanisms to reduce their payroll costs. Older staff members, who generally were better paid, were targeted by schemes such as financial incentives for early retirement, transfers to subsidiaries or suppliers, assistance in searching for new jobs, and support for entering self-employment (J-SMECA, 2003; Sato, 1999). These mechanisms reappeared during the so-called lost decade of the 1990s (Jaussaud, 2001; Sato, 1999).

However, unemployment among workers aged 60–65 years, which had increased during the second half of the 1990s, declined in the early 2000s, due to changes in labour laws and public regulations. In the aftermath of the subprime crisis in 2008–2009, it started to rise again, but since 2010 this unemployment rate has been decreasing (Cabinet Office, 2016). Age remains a barrier to employment though, as recently revealed in a Cabinet Office (2017) report that finds that 10.1% of 60–64-year-olds are looking for work (cf. 5.8% among 55–59-year-olds).

Discrimination against elderly workers results from various factors: legal, political, and managerial (Martine, 2017). The Law on Stabilization of Employment of Elderly Persons (kōnenreisha tō no koyō tō antei tō ni kansuru hōritsu 高年齢者等の雇用等に関する法律) provides a general framework for elderly employment, but it lacks any enforcement measures. If they do not comply, firms expose themselves at worst to a public display of their name as a penalty. The law also does not prescribe any employment conditions before the age of 65 years, in terms of status, nature of the labour contract, compensation, or the nature of the work. Thus, employers enjoy great flexibility (Yanagizawa, 2016), and Japanese courts seldom rule against employers in conflicts over employment extensions. Nor are there stipulations in employer–trade union agreements with respect to seniority, as is common in other nations (e.g. Germany, United States, Sweden), which require a ‘last in, first out’ approach to layoffs. Thus Japanese employers have almost unfettered discretion with respect to which workers to dismiss when implementing a redundancy plan (Hamaguchi, 2016).

Another factor is the so-called lifetime employment policy (shūshin koyō 終身雇用) common among many large firms in Japan. Long-term employment is the norm for these large firms (Aoki, 1988; Debroux & Kuriyama, 2003; Hanada, 1993), so they have tended to recruit young graduates, train them, and select the best performers to retain, by offering them an appealing carrier path. The others would be transferred to subsidiaries or outside firms (e.g. suppliers). Recruitment efforts targeting workers in the middle of their careers were rare (Jaussaud, 2001). Employers preferred younger recruits, so they could train them in accordance with the values and practices specific to the firm, increase their loyalty, and reduce the risk of them leaving to join another company (Koike, 1997).

Wages also correlate strongly with age in Japanese firms, even more so than in other developed countries (Adachi, Okamoto, & Takeuchi et al., 1999; Aoki, 1988), though this correlation may disguise wage increases based on performance evaluations and the related selection mechanism for career paths noted above. Performance evaluations and selection help ensure a high level of employee commitment and motivation (Aoki, 1988; Jaussaud, 2001). However, such a situation may require a mandatory retirement system (teinen seido定年制度) to avoid paying perpetually high wages to employees who have been promoted, especially if their capabilities start to wane. In a ‘lifetime’ employment system, employment actually is guaranteed only until the mandatory retirement age, specified by the company (shūgyō kisoku 就業規則).

According to Lazear (1979), a mandatory retirement system is necessary when companies attempt to enhance their employees’ productivity by introducing a deferred payment system, such as seniority-based compensation. In this type of system, early career employees are paid less than their marginal productivity value; late career employees instead tend to receive wages that exceed their productivity. This scheme can increase the loyalty, commitment, and motivation of both young and mature workers. But to avoid paying an employee more than the marginal productivity rate forever, companies introduce mandatory retirement ages. Higuchi and Yamamoto (2008) also describe mandatory retirement systems as a regulatory mechanism for Japanese companies to reduce costs. Despite this intent of promoting fairness through long-term employment in the deferred payment system, because the mandatory retirement system is based on age, by definition it is potentially discriminatory.

Discriminatory HRM practices

Beyond these general forms of age discrimination, we identify three HRM policies in Japan that may harm elderly workers. First, as a general rule, workers who reached the company-specified retirement age (until recently, 60 years in most cases) were re-employed, frequently with a non-regular employment contract and lower salary. According to the Ministry of Labour, Health and Welfare (MHLW), 93.8% of Japanese companies impose a specified retirement age, and that age is 60 years in 80.9% of cases (MHLW, 2016). A salary survey carried out by the MHLW in 2015² also revealed that workers between 60 and 64 years of age earn lower salaries on average than those between 55 and 59 years of age, with differences of up to 29.1%. Workers between 65 and 69 years of age receive, on average, 35.7% less than this younger group.

Second, Kajitani (2008) notes that re-employed workers rarely receive a new job or function. Only 2% of re-employed workers take on a job different from the one they held just before their retirement age. That is, these elderly workers are paid less for performing virtually identical work and the same workload.

Third, according to the Japan Institute for Labour Policy and Training (JILPT, 2007), few Japanese firms adjust the working conditions for people following their re-employment. Only 20–30% of firms offer fewer work days per week or shorter work days, for example. Therefore, elderly workers’ compensation decreases, but the number of hours they work does not, in most cases.

Despite these general trends, some Japanese firms have devised innovative HRM policies with respect to their elderly workers. We became aware of these innovations only incidentally; their potential benefits prompted us to conduct an in-depth investigation.

Methodology

Our investigation focuses on Japanese firms that have qualified for rewards from Japanese authorities because of their employment of elderly workers. By analysing their HRM policies and practices, we seek a better understanding of possible options in this field. We conducted an in-depth, exploratory investigation of 27 carefully selected Japanese firms, which we identified from 2 sources: a list of firms that received awards in a competition to promote elderly employment (kōreisha koyō kaihatsu kontesuto 高齢者雇用開発コンテスト) and the list of the ‘100 firms where one may work enthusiastically until the age of 70’ (70-sai ikiiki kigyō 100-sen 70 歳いきいき企業100選). The annual competition that promotes elderly employment is organized by the Japan Organization for Employment of the Elderly, Persons with Disabilities and Job Seekers (JEED) and the MHLW. Since 1986, it has granted awards to some 40 firms each year for having implemented innovative employment policies.³ The list of 100 enterprises is created by the JEED, in an effort to support workers who wish to continue working.⁴ The entries on the two lists are similar, and most of them are SMEs, generally located in remote regions outside the highly populated Kanto (around Tokyo) and Kansai (around Osaka) areas. Firms in these more remote regions face difficulties attracting young workers, so they have developed unique expertise in retaining older workers.

The two lists also provide general information about each company’s activity, size, age distribution, and HRM practices. In reviewing this material, we determined that the firms likely could provide more specific information about their HRM practices for senior employees, so we decided to carry out an in-depth investigation among a sample of these firms, using an inductive exploratory approach, to identify specific solutions they may have developed. To ensure the representativeness of this sample, we applied three criteria: firm size diversity, industry diversity, and geographic location diversity. In turn, we derived a list of 130 companies, to which we sent requests for interviews. We ultimately were able to visit 27 companies and interview their representatives; most of these firms are SMEs that employ fewer than 300 workers (mostly 50–200 employees). They span various industries, though some activities that are prevalent in Japan are not represented in our sample, such as banking, finance, insurance, and communications. In terms of geographic distribution, the sample represents 23 regions, indicating widespread coverage of the country. In line with the sample pool though, most of the SMEs are concentrated in smaller cities, with underrepresentation of Kanto and Kansai regions, that is, the most populous areas in Japan (Table 1).

Table 1. Sample characteristics.

Manufacturing
	Food	Industrial equipment	Printing	Textile	Tile manufacturing	Agriculture
Number of cases	4	4	1	1	1	1
Location	Fukuoka; Osaka; Saga (2)	Tochigi; Ehime; Niigata; Shiga	Iwate	Aomori	Tokushima	Kumamoto
Number of employees	33; 56; 100; 64	123; 156; 102; 164	194	200	34	121
Services
	Retirement homes	Hotels	Catering	Transport	Security	Real estate	Car services	Scrap merchants	Maternity
Number of cases	2	3	3	2	1	1	1	1	1
Location	Oita; Ehime	Iwate; Kagoshima; Mie	Miyazaki; Tochigi; Yamagata	Miyagi; Tochigi	Niigata	Tokyo	Hokkaido	Nagasaki	Okayama
Number of employees	210; 159	61; 71; 105	76; 228; 145	150; 60	60	1197	95	36	43

We conducted semi-structured interviews, in Japanese, with the chief executive officers of 16 firms and with human resources managers (with titles such as HR Manager or General Affairs Manager) in 11 firms. The face-to-face interviews took place on company premises. We took careful notes and also audio-recorded all interviews. These data were transcribed in Japanese by computer. We coded and analysed them individually, and then conducted a comparative analysis of the resulting data.

Results

The following results derive from our comparative analysis of 27 firms with experience employing elderly workers that have developed specific HRM policies to support them. We structure these findings according to two main dimensions: the employment conditions of elderly workers who remain at work and the improvements to working conditions, material and non-material, which companies offer to keep elderly workers motivated and performing well.

Mandatory retirement systems

The postponement of the mandatory retirement age offers a strategy to retain workers until the age of 65, and as noted, the 2004 amendment to the ACSEOP required firms to implement such employment systems. In our sample, the companies rely on various system iterations to comply with this requirement, but most of them have set mandatory retirement ages of 65 years or older, which represents the most stable way to prolong employment. Of the 23 firms that set a mandatory retirement age, 11 use 65 years of age, 2 set it at 70 years, 9 use 60 years, and 1 sets it at 63 years. A comparison with national averages reveals the uniqueness of this situation; of the 95.5% of Japanese companies that have set a mandatory retirement age (cf. 85.1% in our sample), only 17.8% of them set it at age 65 years or older (cf. 56.5% in our sample).⁵

Content analyses of the interviews reveal two major advantages of such a practice. First, from a psychological perspective, the executives assert that these policies reassure workers that they may remain in continuous employment until they qualify for public pension allowances. Thus, extending the mandatory retirement age is appreciated not only by senior workers but also by younger ones, because this policy makes their future prospects clearer. Second, extended mandatory retirement ages help employers retain a sufficient workforce, particularly in relatively unattractive jobs such as in the food industry or care sector – jobs often referred to as the 3Ks (sankei), to signal that they are dangerous, painful, and dirty.

Prior academic literature already has identified mandatory retirement systems as employment regulation mechanisms (Higuchi & Yamamoto, 2008), which enable companies to avoid the high costs of paying elderly workers at the end of their careers, in accordance with lifetime employment policies (Guillemard, 2003). The firms in our sample embrace this mechanism, and they note several other benefits of mandatory retirement systems. For example, the firms can maintain a better generational balance and avoid the simultaneous retirement of an entire cohort in a short period of time, which would threaten the loss of know-how. Still, they need to rejuvenate their workforce to acquire new insights too, so they appreciate the flexibility associated with part-time or temporary re-employment options after workers reach the mandatory retirement age. Firms benefit from a flexible workforce that can adapt to changing circumstances. Furthermore, firms can select which candidates they wish to re-employ or not; though they cannot establish selection criteria for re-employment before the age of 65, they can apply such criteria after that age. Most interviewees also mentioned that relatively few workers suffer aging-related health issues before this point, so minor adaptations of working conditions are sufficient to enable them to continue working. However, at older ages, the situation differs significantly from one worker to another, so the firms need a selection mechanism. In many cases, workers who are no longer able to do the job will retire on their own, according to our informants.

Thus, mandatory retirement systems can function as discriminatory mechanisms that expose elderly, re-employed workers to diminished working conditions, but companies with experience in the field of senior employment still regard them as necessary tools. Compared with other Japanese companies, the main distinction that marks these expert firms is the age limit they set. Overall, neither Japanese authorities nor Japanese companies appear inclined to give up on this system, which is deeply rooted in existing management practices.

Payroll management and the compensation system

An aging workforce has a concomitant effect on payroll costs, particularly when wages correlate with age, as is the case in Japan (Adachi et al., 1999). To avoid such costs, all the firms in our sample implement adjustment mechanisms that enable them to limit increases in payroll costs. These mechanisms seek to divorce wages from the worker’s age; instead, wages get linked to the nature of the job, the worker’s qualifications, and performance measures. Among the firms that still link wages to tenure, they establish an age limit beyond which the link no longer applies. These firms also may start to reduce wages after a given age; often a mandatory retirement age from managerial positions (yakushoku teinen 役職定年) may be set between 52 and 60, according to companies. Several interviewees insisted on the importance of treating elderly workers fairly, because this effort is appreciated by all workers in the firm. Several firms in our sample also stopped reducing the wages of elderly workers after age 60, because the policy appeared to have a negative impact on their motivation. However, they still sought to tie wages to productivity.

Working conditions

Firms adapt the working conditions they offer in various ways, but two primary dimensions emerge from our analysis: adaptations designed to reduce workloads or demanding physical tasks and adaptations of the work environment.

The most common adaptation is to reduce the workload of elderly workers. For example, if a company has multiple work locations, elderly workers receive priority in choosing locations closer to their homes, to reduce the effort required to travel to work. In addition to taking on an increased share of the overall workload, younger workers may be required to undertake more physically onerous tasks. In a retirement home, for example, younger workers would be tasked with lifting patients.

In most firms of our sample, though some specific new tasks may have been assigned to elderly workers (e.g. transferring knowledge and know-how to younger workers), none of the companies had assigned specific work to elderly workers based on the age criteria. The elderly workers themselves appear reluctant to be assigned to specific posts that might require new training. However, several firms assigned workers to easier posts if aging affected their work capacity. For example, two transportation companies assigned older drivers to easier routes, and a manufacturing firm arranged the workflow so that older workers did not to have to carry heavy components. In a food manufacturing company, older workers were assigned to a slower-running production line.

In some cases, workers also appeared willing to continue working, despite lacking the required capacity, whether due to age, illness, or work accidents. Several firms cited such cases and explained that they allocated specific job positions that were adapted to such workers. For example, a medical institution assigned a 73-year-old worker to a highly mechanized linen-drapery service, so her physical effort requirements were reduced. A scrap-iron firm that previously contracted out its security services decided to bring the activity in house, to provide jobs for its aging workers.

The adaptation of work environments is another option. Ergonomists detail how adaptations of work environments can reduce workplace challenges (Laville, 1989; Volkoff et al., 2000). Several firms improved their lighting, air conditioning, or noise dampening systems. They also sought to improve workers’ safety and comfort, often based on suggestions from elderly workers. Some firms even established elderly-oriented ‘improvement systems’ (kaizen seido 改善制度), offering rewards for the best suggestions. While such an approach is common in production management fields where the kaizen (改善) concept was developed, this system makes sense in HRM as well for facilitating work environment improvements. Making elderly workers participate in this kind of kaizen system appears particularly ingenious since they are in the best position to identify problem areas and suggest solutions. Work locations then can be adapted to elderly workers’ requirements, such as adding loading equipment so that elderly workers do not have to carry heavy components, or even automating dangerous tasks, such as metal cutting. A traditional Japanese inn (ryokan旅館) purchased lighter mattresses (futon 布団), so that the elderly workers in charge of cleaning rooms could lift them, fold them, and put them back in cupboards more easily.

Adaptations in the workplace also aim to reduce the risk of accidents. Elderly workers have a higher propensity of falls, so many firms in our sample systematically eliminated unevenness in floors or obstacles. Floor coverings also have been changed, to avoid the risk of slipping, which is particularly dangerous for older workers.

Adaptation of working hours

Experts and ergonomists suggest that changes in working hours are one of the best ways to reduce work overloading and work stress for elderly workers (Autume, Betbeze, & Herault, 2005; Labruffe, 2007). In our sample, 22 of the 27 firms offer adapted working hours, with several different options.

First, older workers can choose whether they want part-time or full-time work. According to our interviewees, such a choice is the most frequent demand they receive from older workers, who wish to have more free time. Flexible working hours might entail fewer days worked per week or fewer hours worked per day. Reducing the number of working hours per day can allow elderly workers to avoid the challenges of rush hour in public or private transportation systems. They also might be exempted from night-time work, which is particularly tiring.

Second, additional holidays can be offered to elderly workers, as rewards for their loyalty or for having taken new training courses. One case in particular deserves mention: A retirement home’s manager introduced a ‘grandmother holiday’ to allow (female) staff members to take time off to assist their daughters when they had children, which is a common practice in Japan. Staff members wishing to embrace this practice could retain their jobs, in a sector where recruiting new staff is not easy. According to this manager, the holiday was so successful in retaining senior female employees that she decided to create another holiday, extended to male employees who wanted to take time to deal with personal problems. In certain businesses, such as the hotel industry – and particularly traditional inns such as ryokan (旅館) – training staff to perform a diversity of tasks increases capacity and flexibility, and it also enables employees to take leave more easily when they wish to do so.

Adaptation of training

Older people learn differently (Goldberg, 2007; Laville, 1998) and at a slower rate (Volkoff et al., 2000) than younger people, so companies need to revise their training methods (Labruffe, 2007; Marbot & Peretti, 2006). The firms experienced with employing elderly workers seem fully aware of this need. Their adapted training materials include more images and larger characters, and they offer more breaks during training sessions. Our interviewees emphasized the importance of being cognizant of the needs of elderly workers, to ensure that they feel at ease during the training and encouraged to ask questions or request further explanations. Thus, our interviews confirm the conclusions reached by researchers such as Volkoff et al. (2000) showing that simply adapting training for elderly workers can produce very positive results, similar to those they achieve from training younger workers.

Monitoring elderly workers’ health

The health of younger workers is not a specific concern for our interviewees; after workers reach the age of 60, though, it becomes one. They feel a special responsibility with respect to elderly workers’ health. In some cases, they add specific tests to mandatory annual health check-ups, such as cardiac rates, blood pressure, or diabetes testing. These conditions all become more difficult with increased age, as do physical ailments such as back pain. In line with these considerations, the firms in our sample actively pursue accident prevention. For example, training sessions focus on how to reduce the risks associated with specific tasks, such as lifting patients or carrying heavy components. Health maintenance efforts also include presentations and discussion groups on issues such as healthy nutrition.

Discussion

By surveying Japanese firms experienced in employing elderly workers, we shed new light on the diverse mechanisms available to manage the later years of workers’ careers. We also elucidate the relationship between age and work, and we identify various systems and techniques that can support aging workers in their work efforts. We outline several of them in this discussion, while also considering whether they might be implemented successfully in larger firms, as well as in SMEs.

Adapting compensation mechanisms to longer careers

The cases we investigate reveal that the potential risk of precarious employment for older workers, with a sharp drop in income, is not a universal condition. The firms we studied have developed compensation systems that account for their need to adjust labour costs according to workers’ performance, without drastically reducing wages, so that they can continue to motivate elderly workers. Making fair adjustments to older workers’ wages to reflect their work contributions seems to support the stable employment of aging workers, avoid resentment from younger workers, and encourage older workers’ motivation.

Accounting for diverse career circumstances

Compensation is not the only pertinent parameter; the diverse circumstances that individual elderly workers face are notable, and the firms we investigate have reacted accordingly. Each firm has adapted its policies differently, suggesting that there is no panacea for elderly workers’ employment. Accordingly, we have identified a range of potential solutions implemented by the firms in our sample, including multiple adaptations of working hours for example (number of days, hours worked per day, specific holidays). With regard to elderly workers’ employment, it appears critical to account for the specific nature of each individual worker’s situation.

Involving elderly workers in defining the work environment

Soliciting elderly workers’ input regarding the work environment is a crucial factor, according to our interviews. As several interviewees noted, who knows better than the elderly workers themselves what issues they need resolved in the workplace to enable them to remain in the same employment, as well as what their actual needs and expectations are? Suggestions can be solicited through informal exchanges, formal quality circles, suggestion boxes, or questionnaires that are frequently collected and analysed. With these mechanisms, employers try to involve employees in the decision-making process. As a noteworthy outcome, all workers, young and old, can benefit from most of the adaptations implemented.

Adaptations to support work performance

Our study confirms research by ergonomists that suggests it is possible to maintain a high level of work performance among elderly workers by introducing adaptations to the content and environment of their work. For some jobs, such as sales, training, or service positions, aging might not be a hindrance. Our research confirms that for these job roles, limited adaptations can suffice to avoid diminished performance, even among the oldest, most fatigue-prone workers. The required adaptations often are rather simple and even costless, such as reorganizing jobs, redistributing tasks to multi-generational teams, or altering working hours or work rhythms. In Japan, more costly investments, if required, also may be subsidized if their purpose is to help older workers remain at work (Kayanuma, 2010a).

Providing specific posts for elderly workers

In most cases, the best option is to keep aging workers in the same jobs, because they already have developed expertise with these tasks, even if they require some adaptations to their work content and environment. In other cases though, older workers may not be able to perform their previous jobs anymore, so the innovative firms in our sample offer alternative employment options, in jobs that may require fewer physical skills, to keep their older workers. These options benefit the affected workers, but they also can motivate other workers, who then develop positive, loyal expectations about their own future treatment by the company.

SMEs as a model for large companies

Adaptations to their working environment, through the introduction of new devices or equipment and organizational solutions, appear more common among SMEs, many of which struggle to find young workers to hire. Can the solutions that these SMEs are developing provide a source of inspiration and be adopted by larger firms too? Many measures developed by these SMEs appear to be useful to maintain senior workers’ motivation and performance. Some ideas, such as adapting the work environment or introducing flexible management by adjusting the working hours appear to be especially useful since individual situations may be quite different among senior workers. Likewise, soliciting senior workers’ input about how to adapt their work environment clearly could be adopted without much variation by large firms. Recent developments indicate that some large firms are offering more flexible but permanent contracts to elderly workers (gentei seishain 限定正社員), which provide more flexibility in work time while also ensuring job security. Thus, it appears that large firms too are looking for innovative solutions (Debroux, Jaussaud, & Martine, 2017).

However, since large companies continue running on the traditional HRM model based on lifetime employment to some extent, which includes hiring fresh graduates or relying on seniority-based promotion, some of the practices developed by SMEs such as postponing the mandatory retirement age or reducing the wage curve over the course of a career, may represent a radical challenge for large firms. Indeed, the traditional lifetime employment model, when implemented effectively (Aoki, 1988; Jaussaud, 2001), consistently provides large firms with talented, motivated, loyal workers. That is, large firms still can attract promising young candidates; for given production activities for which they might face a shortage of candidates, they still have the option to outsource those activities, rather than disrupting their entire HRM system. A persistent challenge remains, however, related to how to offer attractive wage growth promises to young employees without being obliged to curb wage growth dramatically in the middle of their careers or abruptly cut the wages of senior workers. The increasingly widespread system of compulsory withdrawal from managerial positions before retirement age (yakushoku teinen 役職定年) – which was present in 36.6% of large firms in 2007⁶ – is a relevant option, but it may not be sufficient. Large firms must continue to adjust their HRM practices, but we predict that they will do so from a different perspective than that exhibited by SMEs.

Conclusion

The combination of the rapidly aging Japanese population, evolutions in health care systems and social protections, alterations to labour laws, and human resources shortages in certain sectors and geographical areas prompted the Japanese government to extend the working age to 65 years. With this study, we investigated how some firms with experience employing elderly workers have succeeded in keeping them at work. This research shines new light on the diversity of initiatives that have been developed in this field. In addition, we confirm that it is possible to ensure the motivation and performance of elderly workers through various adaptations of their work content and environment. In most cases, these required adaptations are relatively simple, low in cost, and beneficial to the entire workforce, not just older workers.

Despite their appeal though, such practices are not widely implemented in Japan. The experienced firms in our sample are mainly SMEs, often functioning in sectors that do not attract younger workers, in remote areas with low population densities, which thus face severe workforce shortages. Japan is marked by a sharp contrast between large firms that still can easily attract young workers and small firms that find this task difficult. Large firms can rely on career management policies that differentiate contracts by workers’ age, select among the workers who wish to continue working, and reduce the wages paid to re-employed, retired, elderly workers. Small firms instead need to adapt their HRM models and find specific solutions to retain the elderly workers they need. SMEs looking for helpful measures in employing older workers may well learn from those with more experience in this endeavour and the solutions they have developed. This is particularly the case in metropolitan areas where SMEs face a shortage of talented young candidates who are drawn by larger firms and where the elderly population is, as elsewhere, increasing.

The contrast between big and small companies may never disappear altogether, though we anticipate that it may diminish over time. For example, large firms are finding it increasingly difficult to transfer workers they do not wish to keep to subsidiaries, subcontractors, or other suppliers. The recipient firms are increasingly selective with respect to these transfers, such that they screen their capabilities and refuse to accept workers who lack the skills they need (Debroux, 2016; Nabeta, 2011). Furthermore, as aging trends continue at a rapid pace, experts and politicians already are debating whether to raise the public pension eligibility age to 67 years, abolish subsidies for the employment of older workers (kōnenreisha koyō keizoku kyūfukin高年齢者雇用継続給付金), or require that all companies extend their mandatory retirement age to 65 years (currently at 60 years, though firms must re-employ workers up to age 65 according to the 2004 amendment). Large firms, until recently, have mainly focused on retaining elderly workers in order to meet legal requirements, but the expanding challenges may force them to consider other, more sustainable solutions, to ensure sufficient performance outcomes and motivation from their older workers. From this perspective, it is still difficult to imagine that large companies will radically change their traditional HRM models immediately, but it is conceivable that they will find inspiration from the specific solutions developed by SMEs for maintaining the productivity and motivation of the senior workers.

Acknowledgements

This research has been presented on September 2017 at the EAJS symposium (Lisbon).

Additional information

Notes on contributors

Julien Martine

Julien Martine is Associate Professor of Management at Paris Diderot University. He is head of Japanese Studies for the English-Japanese Applied Foreign Languages program (BA & MA) and coordinates the International Studies of Economy and Cultures double degree program. His research interests are in the fields of Human Resource Management, Management of Japanese companies, Ageing Societies, Diversity Management and Telework, and he has published several academic papers on these topics.

Jacques Jaussaud

Jacques Jaussaud is Professor of Management and vice-Dean of the Doctoral School in the Social Sciences and Humanities, University of Pau, France. His research interests are in the areas of business strategy, organization, control and human resource management, with a particular focus on Japan, China and other Asian countries. He has published widely in academic journals, including in Management International Review, the Journal of International Management and the International Journal of Human Resource Management. He has co-edited several books, including recently Economic Change in Asia: Implications for Corporate Strategy and Social Responsibility, Routledge, 2017, and China’s Global Political Economy, Managerial Perspectives, Routledge, 2018.

Notes

¹ In addition, unemployment allowances tend to be shorter in duration than they are in most other industrialized countries, which encourage unemployed Japanese workers to seek new jobs actively (Dourille-Feer, 2002).

² http://www.mhlw.go.jp/toukei/itiran/roudou/chingin/kouzou/z2015/.

³ http://www.jeed.or.jp/elderly/activity/activity02.html.

⁴ http://www.jeed.or.jp/elderly/data/company70/03.html.

⁵ MHLW (2016), http://www.mhlw.go.jp/toukei/itiran/roudou/jikan/syurou/17/index.html.

⁶ http://www.jinji.go.jp/kenkyukai/koureikikenkyukai/h20_15/h20_15_siryou/h20_15_siryou_02_02.pdf.