Institutional barriers to work beyond retirement in an aging Japan: Evidence from a recent employee survey

Abstract

This paper focuses on institutional barriers to older workers' continued work beyond the conventional retirement age in contemporary Japan. Under the current institutional arrangements, most older workers in Japan, contending with mandatory retirement rules at the workplace, have the option of being re-employed after mandatory retirement, and experience large wage reductions if they choose this option. We examine how these institutional arrangements in Japan today affect older workers' views and decisions regarding their future labor market behaviors. Using a multi-nomial logit analysis, we analyze data drawn from a nationally representative sample of 1,400 male regular employees, aged 57 to 59, who participated in the 2007 “Survey on continued employment and occupational life after age 60 (Rokujūsai ikō no keizoku kōyō to shokugyō seikatsu ni kansuru chōsa)”, which was conducted by the Japan Institute for Labour Policy and Training (JILPT). Our analysis has found (i) that older workers do not want to be re-employed if their prospective wages are lower than their desired minimum level; (ii) that, if they choose not to be re-employed, they tend to seek alternative employment opportunities by themselves rather than retiring; and (iii) that, other than prospective wage level, the prospective total income (including “in-work” social security benefits) and the availability of flexible work arrangements are crucial factors affecting the future labor market behaviors of older workers.