COVER STORY • Exploring for the Best Models of an Aging Society – Lessons from Japanese Experience • 5Interview with Dr. Atsushi Seike, President of the Promotion and Mutual Aid Corporation forPrivate Schools of Japan (PMAC)

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lderly Workers – Key toAchieving a Sustainable
Super-Aging Society in JapanBy Japan SPOTLIGHT
What will Japan’s super-aging society look like in the future? This will depend on the policies adopted
from now on and the private sector’s adjustability to the aging and depopulation of Japan. As aging inJapan continues in parallel with a declining birth rate, depopulation will be the eventual outcome, resulting
in a labor shortage that could hamper economic growth. To avoid this, Japan will need to try to increase
its labor supply. Among the ways of achieving this, encouraging elderly people to continue to work longer,even after their retirement at 60 or 65, would be at least a partial solution. As we are now the beneficiaries
of longer lifespans with better health thanks to advances in medical science, why should we not take fulladvantage of these aging but still healthy workers today?
Dr. Atsushi Seike, a distinguished labor economist and former president of Keio University, kindly
responded to our questions in the following Interview.
(Interviewed on March 27, 2019)

Introduction – Overall
Picture of the Issue

When a college student today becomes about
65 years old, namely in the 2060s, the ratio
will be rising to around 40%. This
JS: The aging of societies is one ofphenomenon also means that the ratio of thethe key issues today in global
much older people among the population
public policy discussions, and willaged over 65 is also rapidly increasing. The
be at the center of G20 discussions
proportion of the 65-74 age group to the age
in 2019 in Osaka. To achievegroup of those over 75 is now around 1:1,
sustainability in Japan’s aging
but by 2025 this proportion will be 2:3. This
society, we will need to ensure thewill be due to the fact that people in the babysustainability of our social welfare
boom generation born from 1947 to 1949 will
system. But on the other hand, we
have turned over 75 years old.
should discuss the possibility of
Looking into the future further, aroundenhancing the employability of2060 when 40% of the total Japaneseelderly people, given that our
population will be over 65, that same ratio
enormous public debt will not allow
will be 1:2. Thus, we will see a significant rise
us to increase social welfareof the super-aged population. In such a
Dr. Atsushi Seike
expenditure very significantly.
super-aging society we will have two issues.
Would you agree with this policy direction?
The first is rising social security costs. In order to reduce suchcosts per capita, it will be crucial to encourage anybody willing and
Seike: Yes. I think that is exactly what we will need in terms of social
able to work to continue to work regardless of age and support thesustainability as well as personal happiness. We will need to build asocial security system. The second is the decline in the size of thesociety in which anybody willing to work and competent could fully
workforce. Assuming that we will need to shorten working hours andutilize his or her capacity. That would lead not only to thethat raising value-added productivity at very high speed will not besustainability of society but also to personal content. Japan is now
easy to achieve, a significant decline in the labor force would end in a
becoming a super-aging society that no other nation has evershrinking economy. So the aging population would be a serious
experienced. The percentage of the population over 65 years old hasconstraint on economic growth on the supply side. It also leads to a
already exceeded 28% of the total. This is higher than in any otherlarge decrease in consumption in the economy. Since retired people
country. This ratio will reach one-third in the middle of the 2030s.
would consume from their pensions, which will be half of thehttps://www.jef.or.jp/journal/

Japan SPOTLIGHT • July / August 201921

COVER STORY 5

average earnings of workers who are paying premiums, theirconsumption will significantly decline. This will be another constraint
on economic growth on the demand side. Enhancing theemployability of elderly people would therefore be a good solution to
mitigate these two constraints.
Another key issue from an individual’s perspective on aging isabout how to maintain a sustainable life in a super-aging society. At
this moment, statistically the expected remaining life span for a
Japanese at the age of 65 would be about 20 years for men and 24
years for women. This means at the retirement age of 65, in general,
you had around 40 years of working life and will have 20-24 years oflife in retirement. With this balance, it would be difficult to have afinancially comfortable life after retirement. You would need tocontinue to work a little further, such as until the age of 70.
Thus, in the light of social needs and an individual’s needs, we willneed many more elderly people to work longer and enhancing theiremployability will be a key to achieving the success of an aging
society. One advantage for Japan in this regard would be the strong
willingness to work of many aging people. A large portion of older
people in Japan would prefer to work as long as they are in good
health and connected with society. Realizing a life-long active society
in which the willingness and ability of older people can be fully
realized would be a relevant policy goal for Japan in this regard.

Possible Employment System Reform
JS: To enhance the employability of older people,

what do you think would be the necessary reforms to
the employment system in Japan?

Seike: First of all, it will be important to raise the mandatory
retirement age to 65. The lower limit for mandatory retirement has
been lifted gradually under the Japanese Law Concerning
Stabilization of Employment of Older Persons and 60 is now thelowest retirement age defined by law. This law also makes it
obligatory for an employer to keep anybody employed in some form,
such as by raising the mandatory retirement age to 65 orreemploying those who retire at 60 until they are 65, if they want tocontinue to work after age 60.
The majority of the large Japanese enterprises still keep the
mandatory retirement age at 60, but I believe they must raise it to
65. From 2025, the provision of public pensions for employees will
begin at the age of 65. Unless the mandatory retirement age and theage for pension eligibility are connected, consistency between theemployment system and public pension system will not be achieved.
22 Japan SPOTLIGHT • July / August 2019

So raising the lower limit of the mandatory retirement age to 65 is aminimum requirement. With this, you would have to continue towork until 65 and after that we should have as many alternatives as
possible, such as continuing to work part-time in the same company
or working as a freelance with more flexibility. There could be many
people who, having worked hard until the age of 65, will feel likedoing whatever they would like to do. In meeting their desires, wewill need an employment system fixing the retirement age at 65 andproviding more flexibility in continuing to work beyond that age.
JS: What do you think about total abolition of theretirement age, as in the United States?

Seike: It is true that in the United States the Age Discrimination in
Employment Act (ADEA) prohibits a mandatory retirement age in
employment, but employers there are not suffering any
disadvantages from this law. There are mainly two reasons for that.
The first is that in the US an “employment at will” principle
prevails. An employer is allowed to fire any employee it finds
redundant under this principle. In Japan, we have the principle ofprohibiting abusive use of dismissal rights. Apart from dismissal as apenalty, you need authentic and convincing reasons for dismissal,
and even if you have those reasons you need to prove that all means
and efforts to avoid dismissal, such as working hours, have been
exhausted. You also need to demonstrate that there is a rational andobjective reason for selecting the employees to be dismissed. Your
personal opinion about those employees is not to be taken accountof. Lastly, you need to get an agreement on the dismissal between
management and labor unions or representatives of the employees.
So in Japan, dismissal is considerably difficult. Therefore, mandatory
retirement practice at a certain age is a useful means for a Japanesecompany to adjust employment to economic and businesssituations. If business slows down, a company would need to reduce
employment. In this situation, a company would not replace retiring
employees. This works very well as an adjustment process, and for
employees as well ensures job security until the mandatory
retirement age. In this light, it would be difficult in Japan to eliminate
a mandatory retirement practice.
The second reason is that in the US most people retire at the ageof 62 without being asked to do so. This is made possible because
the public reduced early benefit provision begins around that age andalso corporate pension systems are devised to maximize theamounts due to be paid on retirement at that same age. Hereemployees expect a retirement allowance by working until the age ofretirement. This practice creates a mindset for workers to retire atCOVER STORY 5

such an age. It is true that there are certain merits of the ADEA, but
its introduction into Japan would damage the stability of
employment.
JS: If elderly people’s working styles were diversified

as they choose to continue to work after theretirement age, would mid-career recruitment or
reemployment increase, and Japanese management
styles change accordingly? For example, would theseniority-based salary system be replaced by aperformance- or expertise-based salary system?

Seike: The seniority-based salary system is already changing.
Looking at the wage curve profiles of average workers since the1980s in Japanese government statistics, it has been continuing to
flatten. This is encouraging for promoting the employment of older
people, as a company’s personnel costs for salaries would risesignificantly if the retirement age is prolonged under the senioritybased salary system.
However, in the current situation, if an employee reaches the
mandatory retirement age of 60 and reemployed until 65, his or her
salary would be 30-40% less than the one at retirement. This would
be a disincentive to work. Therefore, I would suggest curbing a risein wages starting while employees are in their 40s, making thecurrent wage curve profile even flatter.
It is true that the seniority-based wage system works well during
the first 10 years of working life, as before becoming a full-fledged
employee, young and inexperienced workers in general need to catch
up with their seniors by receiving on-the-job training that theirseniors usually provide them with and a salary raise by seniority canbe justified by their progress in job performance year after year at a
relatively high speed. But after being a full-fledged employee,seniority-based salary raises would need to be more moderate.
It is generally considerably difficult to evaluate your working
performance objectively, apart from jobs linked directly to sales. For
example, it would be not fair to compare the job performance orcompetency of an employee assigned to a job that happens to behighly profitable and that of another assigned to a difficult job torestore a structurally less competitive business activity. So I do notthink the seniority-based salary system will cease to exist
completely. But the steepness of the seniority wage profile would beflatter starting from one’s late 30s or 40s than now.
We have an employment system in Japan of which we should be
proud. I think the Japanese method of simultaneously recruiting new
graduates is an excellent system that could be promoted worldwide.

Thanks to this system, Japan enjoys low youth unemployment. In
parts of the world where youth unemployment is high, it is
economically and socially a big issue. In Europe, for example, young
people start looking for jobs after leaving school or university, andthey are statistically defined as unemployed. Companies also recruit
those with experience for vacant posts that occur spontaneously. So
the recruitment of youth is less prioritized and that also prolongs
their periods of unemployment. But in Japan, young people are able
to find jobs while they are still at school, and the new graduate
recruits in Japan will undergo on-the-job training in a company andbe trained under human resources development programs. They canmaster basic working skills at the initial stage of their professional
life in their company. I think this is an excellent system that should
be preserved in Japan.

Social Security Policies Consistent
with Elderly Labor Force
JS: What would be the crucial social security policies

to encourage elderly people to work longer?

Seike: Poor health would be the most important factor preventing
older people from working longer and prompting early retirement. So
the most important social security policy concerning the publichealth insurance system to encourage people to work longer would
be to promote good health by preventing lifestyle-related diseases
through precautionary care or promoting vaccinations and providing
regular consultations on meals and physical exercise.
Another factor affecting the incentive to work would be a public
pension system that could discourage them from working longer. A
typical example in Japan is the public pension for employees todiscourage those still working. The amount of pension benefits is cut
in accordance with the earnings received by those who continue towork over 65, and thus it penalizes them for doing so. In cases
where their earnings exceed a certain amount, the total amount ofbenefits has to be cut.
At this moment, the Japanese government is trying to encourageolder people to work longer by committing to paying more inpension benefits to those who postpone receiving pension benefits
than the amount paid at age 65. But with the public pension scheme
for those still working which I described above, if you work hard
after 65 and the pension due to you is cut in accordance with yourearnings, you have less extra increase in pension or even cannot
expect any extra increase in pension at all at the age of 70 even withthis policy to encourage the aged to work longer. Thus, the old age
Japan SPOTLIGHT • July / August 201923

COVER STORY 5

pension for those still working would nullify the effect of the good
government policy to encourage postponing receipt of pension
benefits and it needs reconsideration.

Capacity Building for Elderly People
JS: In order to avoid a possible productivity decline by

the elderly labor force then, will we need better
development of human resources or lifelong
education?

Seike: There are two issues here. One is to take advantage of aged
workers’ capacities. There are many top SMEs in Japan with highcompetitiveness in niche sectors. They rely on skills, knowledge,
long experience and sophisticated services to take care of theircustomers’ needs, all of which could be provided by elderly workers.
High value-added, order-made products or services would be what
older workers excel in producing. Given that industries in Japan are
pursuing higher added value, I think the key to raising our laborproductivity is utilizing these older people’s capabilities.
The other is to invest in older people’s health to keep them fit andprolong their lifespan. We will also need technology to play a
supporting role for the elderly when their physical functions decline.
A robot suit enabling an elderly person to carry a heavy item would
be a good example. The deteriorating eyesight of the elderly could be
supplemented by mechanical support. One interesting example isthat brain surgeons would be able to continue to work on operations
even after their 50s with the help of endoscopes to supplement theirpoor eyesight or mechanical handles to correct any trembling of theirhands. This is how we could continue to benefit from the skills andknowledge of older brain surgeons. We would be able to enhance
our labor productivity overall in an aging society by fully utilizing
elderly workers’ competencies in producing higher added value withthe use of technologies.

Helping the Aged Achieve Good Financial
Management
JS: On a different note, could you talk about financial

gerontology, which is helping the aged withworsening cognitive function in their financial asset
management?

Seike: In Japan, as we have a practice of paying large lump-sum
retirement allowances, the aged often have great amounts of
24 Japan SPOTLIGHT • July / August 2019financial assets. But they are facing the risk of worsening cognitive
functions and it is necessary to protect such people’s assets. We
should not allow them to invest in high-risk assets. The Japan
Securities Dealers Association has a guideline in which sales personsof security companies should refrain from selling risky financial
assets to their clients over 75 years old. There are two ways to avoid
this guideline being an obstacle to financial investment overall for theJapanese economy as well as taking the possible earnings offinancial investment from the aged investors. One is to conclude acontract on investments between a financial institution and theelderly before they face any worsening of cognitive function, so thatthey are assured of certain financial benefits from their investments
if or when their functions worsen. Typically they are private pension
plans and mutual funds. The other is to have financial institutions
learn from a medical doctor about the cognitive functions of potential
elderly clients and then decide in accordance with medical criteria
what conditions they should stipulate in their contracts with them. In
the future, it may be possible to connect a financial institution with a
medical clinic, such as through the Internet. I hope this study ofgerontology would lead to effective use of older people’s assets inorder to realize a wealthier life for the elderly or investments that canenhance the overall economy.

Coping with the Aging Population in Asia
JS: There is a high risk of significantly large-scale

aging in Asia, in particular in China. Could thelessons of Japan be useful for these countries?

Seike: Yes. If Japan is successful in achieving a life-long active
society in which the will and ability of older people are fully realized,
it would be a good model for other Asian nations. This would be avery important Japanese contribution to Asia. The aging of societies
is a common issue, in particular for Japan, South Korea and China,
with respective birth rates of 1.45, 1.2 and 1.6. All three facedepopulation, so it would be productive for them to discuss thiscommon challenge and learn from each other’s experience. Pursuinga collaborative path to build up affluent aging societies would be agood subject for a very productive discussion among these threenations, regardless of any political confrontations among them.

Written with the assistance of TapeRewrite Corporation.