OECD urges Japan to scrap mandatory retirement amid labor shortage (2024)

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OECD urges Japan to scrap mandatory retirement amid labor shortage? ›

OECD urges Japan to scrap mandatory retirement amid labor shortage. TOKYO -- Abolishing mandatory retirement will be key to Japan securing the workers it needs amid a population decline, the Organisation for Economic Co-operation and Development said in a new economic report on the country published Thursday.

Foreign workers are crucial to Japan's economy as they help to fill a severe labor shortage due to the rapid aging and plummeting birthrate. The number of foreign workers in Japan more than quadrupled in the past 15 years to 2.05 million, or about 3% of the entire workforce, as of October last year.

Regardless of the industry, it is required by law for companies in Japan to set the minimum retirement age at 60 years old. If the employee wishes to continue working, the company is required to employ them until 65.

Average Retirement Age in Japan

In Japan, the legally mandated minimum retirement age is 60 years old.

The Japanese government is considering raising the mandatory retirement age for civil servants from age 60 to 65 and supporting private companies that retain retiree-age staff, which would help diminish the widening gap between life expectancy and the time at which individuals may exit the workforce (see Figure 2) ( ...

Donald Houston and Stephen Hunsaker explore the UK labour shortage, suggesting that a combination of baby boomers retiring, high Covid infection rates during the pandemic, capacity constraints in the NHS, and Brexit are all at play.

Japan's largest recruitment agency, Recruit Holdings Co., believes that artificial intelligence (AI) can address the country's labor shortages, but cautions that its impact will be limited until people trust the new technology.

Türkiye is an outlier with a normal retirement age of 49 and 52 for women and men, respectively. Except for Türkiye, the lowest ages are 57 for women in Colombia and 62 for men in Colombia, Luxembourg and Slovenia. Denmark, Iceland, Norway and, for men only, Israel have the highest normal retirement age of 67.

Average wage in Japan

As of May 2024, the average monthly wage in Japan is 335,116 JPY (approximately $2,275), according to the Ministry of Health, Labour and Welfare. This is the overall figure but varies by industry, region, age, and gender.

As of 2023, the maximum pension payment is ¥780,000 per year, and the average pay-out is around ¥270,000 per year. However, the actual amount of pay-out can vary depending on the individual's contribution history and the timing of their retirement.

Which country has the longest retirement age? ›

Greece is among the countries with the highest retirement age in the world: 67 for men and women. Workers can claim full pension benefits only if they have contributed to the pension plan for at least 15 years (equivalent to 4,500 working days). Denmark, Iceland, Israel, and Italy also have retirement ages of 67.

The policy change will be carried out over 15 years, with the retirement age for men raised to 63 years, and for women to 55 or 58 years depending on their jobs. The current retirement age is 60 for men and 50 for women in blue-collar jobs and 55 for women doing white-collar work.

If you stay in Japan long enough, you can apply for a permanent residency visa to live in Japan indefinitely, which allows retirement to be an option.

Japan's aging is a major factor in the nation bearing one of the highest public debts in the world at 246.14% of its GDP. The aging and shrinking population has also created serious recruitment challenges for the Japan Self-Defense Forces.

Japan's long-term care provision for its elderly is mostly a state-based, in-kind care service —reducing family caregiving responsibilities, compared to Italy. But both nations are traditionally seen as familistic welfare states, emphasising strong family bonds and solidarity.

Many Japanese companies raised the retirement age they had set, partly in response to this legislation. And despite mandatory retirement policies, many Japanese companies allow their employees to continue working beyond the age of 60, although generally at reduced wages.

Japan's productivity growth has been hobbled by inadequate competitive pressure and a rigid labour market. Competition fuels productivity, as the most nimble and innovative companies win out over less efficient firms.

In Japan, 73% of workers are not engaged at work in 2022, compared with the global rate of 59%. Differences by gender only add to the situation's complexity. Female workers in Japan are more likely than male workers to be not engaged (78% versus 69%), emphasizing a need for more inclusive policies.

Before the pandemic, Japan's shrinking and graying population had created one of the planet's tightest labor markets. Even now, some companies are having difficulty finding workers, with more than 120 job openings for every 100 job seekers nationwide in April.

Structural Impediments: The complex structure of Japan's political economy - particularly the close, symbiotic ties between the economic bureaucracies, like the Ministry of Finance (MOF), and the corporations under their regulatory jurisdiction, like banks and insurance companies - has also contributed to Japan's ...