New Retirement Concept in Rapidly Aging Japan

Osaka – Sunday, August 15, 2010




Nikkei, Japanese newspaper specialized in business and economy, reported in their special article about emerging new retirement concept of baby boomers in rapidly aging society of Japan. One of the trigger is the fact that the age people can start receiving a part of their welfare pension insurance is to be raised from 60 to 61 in 2013, as the first step of gradual rise to 65 by 2025.



The official retirement age in Japan is 60, and it means that people currently below 57 years old will temporarily lose means of income unless their employment is extended. Also, leveraging people over 60 is vital for the economy and the society of Japan when it is estimated that in 2025 two people of the generation still working is to support one elderly citizen.



1. How Japan is an aging society?






1) Japan is already a super aged society



Japan is already a super aged society, with 23% of its population being over 65 years old. This is because according to categorization, it is aging society if the ratio of population over 65 years old is over 7%, aged society if it is over 14%, and super aged society if it is over 21%.



Moreover, in a few years, baby boomers will reach 65 years or older to join elderly citizen and according to the estimation by the UN the percentage of the elderly (i.e. people above 65 years old) is to be over 30%. This is more than 18% of the U.S., 22% of France and 25% of Germany. Thus, Japan is to face a super aged society that no other countries in the world have experienced.



2) Japan is to face decreasing population and shortage of labour



In super aging society, Japan is to face decrease in population and shortage of labour. It is estimated that in 2025 the population will be 119 million, which is minus 7.9 million from the current 127 million. On the other hand, labour population (people whose age is 15 – 64) that supports the country’s economy is to decrease by 10.3 million. This means that potential economic growth will further decrease.



3) Social security benefit cost will expand



With slowing down/decrease in economic growth meaning less income, social security benefit cost will reach 141 billion yen in 2025, which is a drastic increase from 98 billion yen in 2009. Therefore, managing to pay cost for pension, healthcare and nursing care is a critical challenge for Japan.



2. How some companies and organizations started to adapt to super aged society?



1) Re-employment



In April 2010, Honda implemented a system in which in principle the company re-employs all retired workers (60 years old) who would like to continue working until they reach the age of 65, with the stance of “eliminate anxiety of employees when we are to face 2013, the start of year without pension benefit.” And the company already has re-employed 90 employees out of 228 retired workers.



This is an evolutional system because only 40% of companies allow, upon their request, retirement employees to continue working, when including business owners, 70% men of 60-64 years old and 40% women of 60-64 years old work already.



2) Employing people over 60 years old exclusively



A manufacturer located in Gifu prefecture that produces parts and components for consumer electronics been recruiting people over 60 years old exclusively. They do so by recruiting with the catch copy of “we are looking for motivated people, but the candidate must be over 60 years old”, and recently hired 8 new people. For this reason, half of their 90 employees are what is called “silver human resources” who are over 60 years old. The objective is minimizing personnel cost while improving factory operating ratio at weekends and holidays.



3) New working system for engineers over 60 years old



A manufacturer located in Chiba prefecture that produces components of construction machinery implemented a flexible working system for engineers over 60 years old. The target engineers can work from 3 hours a day and from 3 days a week. The reason for hiring senior employees is the necessity of smoothing out and balancing optimum employment. They had 50 veteran engineer at the peak but now only 16 with the worldwide recession. The company plans to call back engineers who used to work for them.



4) Nursing assistance volunteer system



A city in Tokyo implemented a nursing assistance volunteer system in 2007. In a case of a 72 year old man who leverages this system, he volunteers 2 days a week, helping with house cleaning, washing dishes and serving trays. He acquires 1000 points for 10 duties and can save up to 5000 points a year. He can utilize the point (1 point = 1 yen) for premium for nursing-care insurance.

A professor comments that this kind of system contributes to acquiring caregivers and decreasing insurance cost if network of elders expands. Since the implementation in 2000, premium for nursing-care insurance increased by 40%. People who are certified as being in need of care above 65 years old is already as many as 4.7 million people and caregiver is chronically insufficient.