Employment Policy andOld-Age Pension in Japan- Their Interactions EESC Workshop on Demographic Change
Kobe University, 22 September 2010
Yuki SEKINE

1Ageing in Japan! As of 2008, 22.1% of Japan’s population(127.8 million) was 65 years or older.
! Japan has the fastest ageing population inthe world.
! It is also ageing rather well. Japan’s elderly
are healthy, and remain in economic activity
longer than in most other countries.
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The challenges:! Social Security: Ageing is a challenge forthe financing of pensions (old-age) andmedical care costs.
! Employment: Being able to maintainemployment longer is at the same time achallenge for employment market policies,
and a necessity for the financing of socialsecurity.
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Japan’s policies towards Ageing! Japan has adopted an active policy towards

ageing, adopting in 1995 a « Basic Law on theStrategy against the Ageing of the population ».
! The Basic Law (1995) defines Japan’s policy
orientations towards Ageing, based on theprinciple of every citizen’s right to participate
actively and independently to society’s activities,
throughout his/her life, including through work.
4The Basic Law on Ageing! The Basic Law of 1995 has defined 5 main fieldsof action:– Income security and right to employment– Personal care
– Lifelong education and participation in society– Living environment (housing, security)– Research on Ageing!

It has also created within the Cabinet Office, aspecial Committee in charge with Ageing policies.
5Old-age Pension
Individual schemes
National Pension Fund

Comp. schemes
Priv. sect. pension

Ba si cAll otherPubli.sect. pension

Na tio n alPen si on

Employed workers

Private sector

Public sector

SpousesPublic Pension

Private Pension

Insurance companies, etc.

Dependent
spouses!Public pension constitutes on average 71.9% of an elderly household’s

income, other sources being activity income (17.6%), capital income (7%),
and other social security benefits (2%). (Kokumin seikatsu kiso-chousa 2004)
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Old-age Pension! Public pension is a pay-as-you-go pension andcovers the entire population aged over 20.
! It has been amended numerous times mostly toadapt its financing to demographic changes.
– The eligibility age for full pension has been raised
gradually from 55 years old (1941) to 60 (1954 -1974)
and finally to 65 (1994 - ongoing)– The pension system attracts high public and mediatic
attention, emphasizing the effects of demographic
changes on the financing of pensions.
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Old-age pension! The Government responds by adopting

reassuring measures:– The long-term fixation of pension insurance
fees (up to 2018)– It is revising pension finances every five years
on a time span of a hundred years.
! A recent trend (from 2000) is to emphasizeon the security of private pensions, mainlycomplementary pensions.

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Employment! Japanese companies have long based their

HR policies on seniority and age.
! The utility or the necessity of introducing a
concept of « age-discrimination » is largely
debated.
! This concept remains however very limited
in its effects on employment practices.
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Employment Practices! Japan is known for its long term employment

relations, or « lifetime employment » (born around1900)! It is:– A highly collectively managed system– Recruitment takes place at graduation, and employmentends at retirement.
– Has contributed to Japan’s economic expansion.

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Employment: « Internal Market »! Employment practices have evolved andchanged, and lifetime employment isregressing.
! However HR management remains largely
collective and still relies heavily onseniority.
! Labour markets are « internal » while
external markets are rigid.
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Employment: Low Mobility! Very low labour mobility, making it difficult for

unemployed workers to find re-employment on
the external market.
! Difficulties are even higher for workers above acertain age.
! Government has taken measures assisting theemployment of middle-aged and older workers
from 1971, setting an employment quota (6%)
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Employment: Retirement Age! The raise of the pension eligibility age from55 to 60 years (1974) has been followed by
the raise of the retirement age:
! In 1986, the Older Workers Employment
Promotion Law invites companies to raise
their retirement age to 60, then formallyforbidding a lower retirement age in 1994.
13Retirement Age and Pension! Meanwhile, the pension age has been raised

again to 65 (1994 to now).
! The cited Law has in 1990 introduced an« obligation of effort » imposed oncompanies to maintain employment until 65years. (with the Govt’s financial support)! This has again been changed to a formal
legal obligation by amendment in 2004.
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Debates on Age discrimination! A « new » debate, started in the late 1990s,dealing directly with the concept of AgeDiscrimination.
! Linked with new HR policy trends in enterprises:– Less enclined for retaining a workforce trained within
the enterprise– More enclined to acquire on the external market, alabour-force able to respond to their needs immediately

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Debates on Age discrimination! The new debates suggest that we simply

abandon seniority (and age) as a criterion inemployment.
! The first « formal » statement to that sense
has been expressed by the then Economic
Programmation Office (keizai-kikaku-chou)in an intermediate report of 2000
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Skills and Competences! The report (2000) recommended actual

skills and competences as economicallymore justified criteria in employment thanage and seniority.
! The rigidity of the external labour market,
attributed to the traditional seniority-based
practices is another argument in favour of
its abandonment.
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Legal expression! This new trend is reflected in the amendementof The Law on Employment Policy (2001),
creating an « obligation of effort » ofcompanies to abandon age as a HR criterion.
! Ten exceptions to this article were suggested
in the Ministry’s guidelines to the article, allshowing the degree of dependency ofJapanese society to « age» as a criterion.
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Legal expression (2)! The abovementioned obligation of effort

was amended to become a simple legal
obligation in 2007.
! Out of the ten exceptions, three wereabandoned, that seemed less justifiable:– The use of salary scales based on seniority– Customers’ age range– Physical abilities
19Conclusion! The traditional HR practices, both highly uniform

and collective, while providing high job security,
were also blamed as overly rigid.
! The uncontrollable ageing of the population andthe pool of aged though energetic elderly workers
it has created, is reorganizing Japanese labour
market, demanding for more flexibility and « agefreeness ».
! This might take some more time to be accepted…
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