August 28, 2014 12:00 am JST

Japan rethinks retirement

SHINICHIRO UNOZAWA, Nikkei staff writer

Mitsuko Kotachi landed a regular position at this Tokyo nursing home at the age of 71.

TOKYO -- The graying of Japan is having a dramatic effect on the nation's labor force. In the decade through last year, the number of workers aged 60 and up increased more than 30%. In 2009, senior workers surpassed those in the 20-29 age range. Employers are being forced to rethink retirement policies once aimed at keeping young blood coursing through the corporate veins; some are even actively recruiting older talent.

     Generally, Japanese companies oblige employees to leave their jobs once they reach a certain age, regardless of their capabilities. This opens up positions for fresh graduates.

     But with fewer young people entering the workforce, some businesses are facing dire staff shortages. Construction companies, restaurant chains and other enterprises are deferring or scrapping plans to expand because they cannot secure sufficient human resources.

     As a result, some companies are loosening their retirement rules to avoid pushing out individuals who still have a lot to offer. Sato Holdings, a maker of bar-code printers and other automatic identification systems, is one of them.

     Sato's retirement age is set at 65, but in 2012 the company decided to allow workers to stay on longer -- provided they have what it takes to create new projects for themselves.

     "There are many people who want to keep working over the age of 65," said an official in Sato's human resources development department. "Some employees become highly motivated after they turn 60 because they want to work as long as possible. We would like to tap their power."

     On the other hand, Sato recognized that for many, turning 60 is a time to reassess priorities and strike a better balance between work and private life. Not everyone wants to stretch themselves thin in the years leading up to retirement. So starting in fiscal 2013, the company introduced a four-day week for certain lines of work. Offering 60-plus employees flexibility, Sato seems to believe, is the key to making the most of their skills.

Seniors serving seniors

In Japan's nursing care sector, demand is surging and labor shortages are chronic. Currently, the field's job-offers-to-seekers ratio is nearly 2-to-1. Young people tend to avoid the nursing profession, which they consider physically demanding yet low paying.

     The situation prompted Message, which runs about 280 nursing homes nationwide, to do away with its mandatory retirement policy in April. This is not just about retaining workers but also hiring new ones: The company is looking to fill positions with workers aged 50 and up, and the lack of a retirement rule makes Message a more attractive employer.

     Meet Mitsuko Kotachi, a 71-year-old who recently took a job with Message. Since returning to the labor force when she was in her 50s, Kotachi was able to land only part-time jobs that offered no security. Message, in contrast, offered her a regular position. She now works at a new nursing home the company opened in Tokyo in June.

     In some ways, Kotachi feels her age works to her advantage. Most of the home's residents are in their 70s, 80s and 90s, and she says they seem to find it easier to relate to her than to younger caregivers.

     Still, while things seem to be working out well for Kotachi, Message is in a minority among Japanese companies. According to research conducted last year by the Ministry of Health, Labor and Welfare, only 2.8% of publicly traded businesses with more than 3,000 employees have abolished obligatory retirement. Most companies still peg their retirement age at 60.

Maintaining motivation

Corporate managers hesitate to abolish the cutoff, or push it back, for fear of side effects. If a company allows elderly workers to stay on while holding overall personnel expenses steady, it naturally squeezes the salaries of younger generations and makes it even more difficult to bring in fresh recruits.

     One solution is to slash the seniors' salaries. Some companies let workers keep their jobs after retirement age but cut their pay to less than half of what they once earned. Quite a few aging workers see little point in accepting a drastic wage reduction and would rather just call it a career.

     Keihan Electric Railway may have found a way to keep aging workers on the payroll without destroying their motivation.

     The company, which runs train lines between Osaka and Kyoto, has many older employees who handle track maintenance and other jobs requiring special skills. Management, aiming to ensure smooth operations amid generational change, decided to raise the retirement age from 60 to 65.

"Your age will not be a handicap"

A study, however, showed that without changes to the company's pay scale, the five extra years would slice about 4 billion yen ($38.4 million) off annual profits. This spurred management to propose a system in which salaries would begin to gradually decline at age 55, rather than rising until age 60.

     Keihan Electric employees accepted the new system after management showed that despite the salary reduction period, the extension of the retirement age would increase lifetime pay.

     Seibu Shinkin Bank, a northwestern Tokyo-based creditor that serves small and midsize businesses, is in Message's camp: It abolished its mandatory retirement system three years ago. The move caught the attention of 40- and 50-somethings working at major banks. Many opted to switch jobs rather than spending the twilight of their careers in sinecures.

     Katsuji Ushijima, 53, made the leap from another financial institution soon after Seibu Shinkin's policy change. Kanji Ochiai, Seibu Shinkin's chairman, provided the final nudge that made Ushijima sign on. "At this bank, turning 60 does not mean your career is over," Ushijima quoted the chairman as saying in his last job interview. "Your age will not be a handicap at all."

     Ushijima now serves as the general manager of a Tokyo branch that opened in July.

     "If your future is predetermined when you're still in your 40s, it makes life boring," Ushijima said. "I would like to continue working until I use all my energy."

     The graying of Japanese society poses a huge challenge for companies. But finding ways to allow older citizens to contribute -- rather than shutting them out -- could go a long way toward maintaining corporate vitality.