The Super-Ageing Future for Europe and Japan

14/06/2016 12:40 | Updated 14 June 2016

At a conference last week in Fukuoka Japan, I was invited to describe the European approach to workforce ageing, for an audience of, in the main, members of the world's first super-ageing society. If this sounds like the conference speaker's equivalent of bringing coals to Newcastle, it was and it wasn't.

Japan is ageing faster than any other country and, as always, has lessons to teach the West. Life expectancy at birth has increased from 64 for men and 68 for women in 1956 to 80 and 87 respectively in 2013, so the Japanese are clearly getting things right on the health front. For all that, there are bizarre contradictions between Japan's demographic trajectory and its national employment policies.

While Japan's stratospheric old age dependency ratio will have profound consequences for labour supply and the economy, Japanese politicians are suspicions of younger "foreigners" who could make a difference and fill many of the hardest to fill job vacancies. Japan's population is shrinking - by 950,000 in the last five years. Surely, being "anti-migrant" is a policy to avoid.
Such attitudes remind one of the debate in the current Brexit referendum. The inflows of largely younger migrants from Europe are rebalancing the UK's demographic profile, filling skills gaps and supplying much needed committed workers. No matter, an anti-migrant invective paints the country as "swamped" by foreigners "draining our resources", "clogging up our schools" and "overwhelming our transport infrastructure."

Awareness of demographic change can provide a useful counter argument. Looked at relative to most other European countries, migration has been good for the UK's demographic profile and old age dependency ratio. We are not ageing nearly as fast as Germany for example, and migration is part of the reason.

One disturbing feature of Japan's labour market is that it tolerates both age and sex discrimination. (There are no effective equal pay laws for example - though court cases are raising challenges to this state of affairs.) I was happy to mention our laws prohibiting discrimination on grounds of gender, ageism, disability, sexual orientation and religious belief to my Japanese audience, whilst conscious that back home some describe these as "EU meddling" and "excessive regulation".

Having (it seems like yesterday) supported removal of the UK's default retirement age of 65, I found Japan's present rules around retirement a disappointing revelation. 94 per cent of Japanese private sector employers have a designated (that is, mandatory) retirement age, mostly age 60.

Article 8 of Japan's "Employment Stability for Older Persons Act," (an interesting concept!) makes age 60 the minimum age for compulsory retirement. Article 9 of the same law obliges employers to provide workers with employment stability up to 65. This seems confusing.
This legislation was enacted in 1986 following the declining financial health of the Japanese public pension plan. Reforms (including cutting benefit levels and raising the pension age from 60 to 65) were introduced, to avoid a massive increase in premiums. At the same time firms were encouraged to raise their retirement ages to 60 - previously they were 55 or lower.
Hence, nowadays people "retire" at 60 and are then rehired on completely different employment conditions, sometimes in a different (but associated) company set up expressly for the purpose of employing "elderly persons." The status, employment security and remuneration of these post retirement jobs is significantly worse than the regular jobs that employees have been forced to quit on retirement.

I struggle with the cultural differences here, but it seems an odd way to carry on. Surely, such arrangements will have to change as society ages. It makes no real sense to employ people in jobs where they are operating below their capacity, simply to satisfy some image of what kind of work is "suitable" for an "elderly person" to do. This is particularly so when the workforce is shrinking and ageing.

On the other hand, people are encouraged to continue working beyond 65. In Fukuoka, the part of Japan where I was staying, the Prefectural Government has an action plan "to realise the Active at Age 70 society." "Two out of three older people are willing to work to 70 or over," they claim. Women, two thirds of whom give up their jobs on childbirth, are being encouraged back into the workforce. Equality and family friendly employment policies could make a big difference.

People in Japan continue working beyond 60 for varied reasons; supplementing inadequate pension incomes, giving meaning to their lives or keeping in touch with society are some of them. However, to be "retired" and not yet entitled to draw a pension provides a powerful impetus to accept work in some lower capacity in the hiatus between forced retirement and pension age.

These policy paradoxes affect Japanese women in particular. The subject matter of the conference, Working Women in an Ageing Society, was indeed timely. Women, it should be said are less likely to acquire employment on "regular" (that is to say, secure) conditions anyway, and even if they do, they can be paid as much as 30 per cent less than a male doing comparable work.

By 2030, 60 plus people will account for 1.4 billion people globally or 16.5 per cent of the world population. By 2050, it will be 2.1 billion or 21.5 per cent of the global population.
France, Germany, Italy, Sweden and Finland are among the European countries with 25 to 29 per cent of their people over 60. Japan is already in the oldest population category, with more than 30 per cent 60 plus.

There are big issues of attitudes. When employers, and even older people themselves, believe decline in old age to be the "natural" state of affairs, they may be creating the very scenario of their own despair. In Japan I found the apogee of this mind-set in the expectation that workers must wind down towards compulsory retirement on lower status jobs with less pay and protection.

The belief that the ageing workforce will inevitably be a source of lower productivity and economic decline, provides support for employers who don't invest in training older workers or bother with the long term impacts of health on older workers' efficiency because doing so is "a waste of resources."

But who are we to criticise? Many employers in the UK still accept - even welcome - retirement as inevitable in one's early sixties. If employers expect less efficiency, they may well get it. Our old friend the self-fulfilling prophesy, comes into play.

Hence, I argued in my conference speech, the policies needed are the very same pro-active age management approaches which have been advocated by European policy makers and employers, together with legislation against age discrimination, now widespread across Europe.
I don't imagine that in the event of Brexit we would necessarily abandon all that we have adopted from this agenda, but the European Union has been a positive force for changes in employment conditions and hopefully will continue to be so.

And while aspects of Japanese society, such as its encouragement of healthy living and life-long learning, seem to provide support for the successful super ageing workforce, it would seem there are gaps to be filled by new policy measures. Such policies should be designed to maintain workers' capacity and extend their working lives. Really, it is hard to see that we have any alternative.

British society, Japanese society - the super ageing workforce will demand common sense liberal measures in both cases. We can learn a lot by considering how other people do things, despite our cultural differences - or maybe because of them.