Japan Business rely on the old guard to overcome severe labor shortages

Some economists expect the average pension-to-wage ratio to keep deteriorating and worries are growing that Japan’s ‘pay-as-you-go’ pension scheme may be unsustainable

Government is considering raising the retirement age to 70 or 75 from 65 now, to ease pension burdens as well as a labor crunch. Japan’s population is among the oldest on the planet and has one of the longest lifespans, putting pressure on its pension system. The current law requires companies to allow employees to work until 65 if they wish. In practice, most companies, trying to keep a lid on labour costs, set a mandatory retirement age at 60, with an option of further five years’ work on reduced pay. Over 8 million Japanese workers are 65 or older, a staggering 12 percent of the entire workforce, government data shows. The old-age dependency ratio is over 50 percent, and is expected to rise to nearly 80 percent by 2050, the OECD says. The average employee pension in Japan is about 150,000 yen ($1,350.01) a month, lower than government’s target of 60 percent of the pre-retirement income for salaried workers, which would be 220,000 yen on average. Cutting back on Japan’s notorious long hours at work may also make longer careers easier to sustain, analysts say.