Employment of senior workers in Japan

ABSTRACT

The Japanese HRM practices and policies resulting from the compromises between labor, management, and the state emerged after WWII and coalesced in the 1960s. The subsequent emergence of a very cohesive, stable, and dynamic employment system is largely credited with playing an important role in Japan’s economic success and the stability of Japanese society in the postwar period. The treatment of senior workers after mandatory retirement occupied a specific place in this system. A mix of institutional, socio-cultural, economic, and demographic factors created a virtuous circle, and Japan was considered a model of management of those retired workers. Companies were able to maintain employment for many of them in relatively good social and economic conditions beneficial for both parties, even after mandatory retirement, and this assured a good transition to definitive retirement. However, despite Japan’s relative success in this regard, this paper exposes why the traditional HRM policies and practices are now considered socially and economically unsustainable in the treatment of retired senior workers. It argues that Japan cannot afford under-utilizing senior workers during the pre- and post-retirement periods of their career in the way that traditional policies and practices have institutionalized. Not only does Japan’s economy need senior workers, but not giving them the opportunity to maintain decent standards of living would have dire social and economic consequences. This calls for revamping the HRM system, so that the talent of senior workers can be used for their own benefit, while contributing to their employers and to society at large.

KEYWORDS:

• Aging society
• neo-liberalism
• pension eligibility
• psychological contract
• dual labor market
• life-cycle contracts

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ The age dependency ratio for Japan is calculated as follows: Age dependency = (people younger than 15 and older than 64) / (working-age people ages 15–64). A higher value for Japan and other countries means that employed people support more non-working people, either young or old (The Global Economy.Com 2021).

² Nowadays, it is estimated that about 45% of large companies still adopt a system according to which managerial responsibilities are relinquished a few years before retirement, generally between 55 and 58 years old (Yatabe 2017).

³ The eligibility age for the earnings-related part of the pension started to move up gradually from 2016 onwards. It will reach 65 years old for all organizations in 2025 (MHLW 2014). Since 2013, companies are obliged to keep on their payroll all workers wishing to continue working until age 65 (MHLW 2014). Re-hired contractual workers were entitled to receive part of the earning-related pension while working, contributing to the “win-win” arrangement. Assuming that most of them will remain contractual in most companies with lower wages, raising the age of pension eligibility means that the income of older workers between 60 and 65 would decline significantly without higher public support to compensate the fact that part of the pension will not be paid anymore if the employers do not pay the difference.

⁴ The concept of Decent Work has been defined by the ILO and endorsed by the international community as: “Opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity” (International Labour Organization (ILO) 2021).

⁵ In 1971, large firms were required to have 6% of their workforce over age 45, and in 1976, this quota extended to workers older than 55. However, the quota policy ended in 1986, with the passage of the Act Concerning Stabilization of Employment of Older Persons (Martine and Jaussaud 2018).

⁶ The main reason remains the social embedment of the long-term job guarantee among employers, but it can be thought that it is also because neither the state and local governments nor companies and the workers themselves are ready to cope with drastic change in this regard. The state does not have the institutional means to re-train the laid-off workers and channel them back into the labor market under favorable conditions. In addition, the unemployment allowance schemes were developed to fit a workfare system, accommodating a relatively small number of workers during a short period. It cannot be transformed significantly in the current dire public finance situation. Therefore, most workers would have difficulties finding another job, despite the progress of the public and private job support systems.

⁷ In line with the initiatives taken by the United Kingdom and Scandinavian countries, Japan has reinforced its public employment services in the last three decades to help senior workers to improve their employment prospects. This includes opening offices that support older job seekers and incumbent workers through various programs such as Career Exchange Plazas, which were established across Japan in the 1990s (Japan Institute for Labour Policy and Training (1995)) to help middle-aged and older white-collar job seekers. They work in close cooperation with local Talent Banks (Jinzai Koyō Ginkō). At the same time, Vocational Experience Utilization Centers, Industry Employment Security Centers, and Elderly Employment Support Centers/Corners (Naganawa 2002) have also been established in all prefectures to provide free placement services and dispatching services for personnel over 60.

Additional information

Notes on contributors

Philippe Debroux

Philippe Debroux is a Belgian citizen resident in Japan since the 1970s. He has a PhD in applied economics from Brussels University and holds a MBA degree from INSEAD. He is emeritus professor of international management and international human resource management at Soka University (Japan). His research focuses on development in HRM, innovation and entrepreneurship in Japan and Southeast Asia.