Skills, Wages, and the Employment of Older Workers

Abstract

Given the rapid aging of Japan’s population, the employment of older workers has become a worrisome issue for Japanese society. Promoting employment opportunities for older workers, particularly those 60–64 years old, is especially important because almost all firms have a mandatory retirement age of 60, but the eligibility age for receiving the public pension is being raised gradually from 60 in 2000 to 65 in 2025. More precisely, the eligibility age for receiving the basic payment (fixed part) of the pension benefits will be raised to 65 by 2013, and that for receiving the salary-related benefit will be raised gradually from 60 to 65 by 2025. The government has been coping with the issue of employment of older workers for some 25 years. Given the extremely low ratio of job offers to job applicants for older workers, the basic strategy has been to raise the mandatory retirement age and to promote continuous employment after the mandatory retirement age in the same company. Continuous employment is defined as employment after the mandatory retirement age and includes re-employment and extended employment. Nonetheless, recent studies have revealed that, under Japan’s strict employment-protection legislation, middle-aged and older workers are substituting for young workers in employment, so that maintaining the employment of older workers has negative effects on the employment of young workers. With high youth unemployment, the question of how to implement employment measures that benefit older workers without harming young workers is receiving greater attention.