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Politics

Japan will encourage companies to employ workers until 70

Government plans hiring incentives and pension reform to pad shrinking workforce

The Japanese government wants to encourage more seniors to work to shore up a shrinking labor force.

TOKYO -- The Japanese government will pave the way for workers to stay employed until age 70 if they so choose, as part of its effort to reshape the workforce in the face of an aging and shrinking population.

Tokyo looks to revise legislation that now requires companies to let employees who wish to do so work until age 65. This will be gradually raised to 70, initially as a nonbinding target.

Prime Minister Shinzo Abe told the Nikkei Asian Review on Monday that he wants to let people continue working past 65. The government will discuss the issue with business leaders in the fall.

Before changing the law, the government will provide support to companies interested in employing seniors. The draft budget for fiscal 2019 will include expanded subsidies for businesses that introduce midcareer hiring.

Companies tend to continue hiring older workers once they do so the first time. Tokyo aims to encourage businesses to start taking in senior employees on a trial basis.

These measures will be accompanied by larger incentives for seniors to work. Companies set their own retirement ages -- typically lower than 65 -- and employees who wish to stay on beyond this point are often rehired at a significantly lower wage. Two in three people aged 60 and older want to work past age 65, according to a government survey, but the reduced pay means that many opt to live off their pensions instead.

The public and private sectors will look to revamp performance evaluation and compensation systems to ensure that seniors with the ability and desire to work do not suffer a financial hit for doing so.

The government will also consider reworking the pension system, offering larger payouts to those who start collecting benefits at age 70 or later.

But it is unclear whether businesses wary of higher labor costs will go along with this effort. Companies with seniority-based wage structures may respond to a later retirement age by reducing pay at the entry level. And if the economy cools, businesses will grow even more averse to measures that raise costs.

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