The special feature in the March 4th edition of Nikkei Business is “Later retirement panic – how to avoid creating obasuteyama in your company”. Obasuteyama is a term used in Japanese folklore and legend for the practice of abandoning elderly women and the infirm on a mountain when the family or village could no longer afford to look after them.
In common with many developed countries facing an ageing population and a subsequent pension funding problem, Japan is prolonging the legal retirement age. A new law (Concerning Stabilization of Employment of Older Persons) will be enacted in April, requiring companies to begin raising, in stages, the mandatory retirement age from the current 60 to 65 by 2025.
This might seem surprisingly low compared to the UK, where there is no mandatory retirement age. The default retirement age of 65 has mostly been phased out and workers can choose to stay if they want to, and their employer must not discriminate against them if they do so. The state pension age is rising – with men and women in their forties having to face the possibility of no state pension until they are 70.
Japanese companies often re-hire their employees after retirement, particularly if they have reached a level of seniority, – and of course they do so at lower salaries. Conversely, if a certain level of seniority is not reached by 50, the bigger companies start putting pressure (known as “kata-tataki” or shoulder tapping) on employees to take up a “second career” – offering them lower paid positions in joint ventures or subsidiaries.
This shoulder tapping had become more persistent and younger and younger employees targeted in the 1990s. Before 1998 there was no legal retirement age, but most companies set 55 as the retirement age. In 1998 60 became the mandatory retirement age and from 2006 employment until 65 was guaranteed, with companies able to choose between either prolonging the company retirement age, or re-hiring retirees or abolishing the retirement age entirely.
Many companies chose the re-hiring route, as firms were allowed to choose who to re-hire, but from 2013 this avenue will be closed and all employees will be guaranteed employment until 65 by 2025.
The Nikkei highlights four concerns companies have with their elderly cluttering up the mountain slopes – that the younger employees will lose their motivation, that everyone will have to tiptoe round the elderly to show proper respect for seniority, that there will be too many people giving directions and that it will have a knock on effect on graduate hiring. The Nikkei suggests countering this by getting the over 60s to earn their own living in the company, putting them into new business development (hmm, that’s been tried before, not necessarily successfully), splitting leadership roles with younger employees and in general making more older/younger combination pairings.
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