Japan's Gray Tsunami

Ryutaro Hashimoto, a former Prime Minister of Japan, is presently Minister of Administrative Reforms. The following is adapted from remarks by Hashimoto at a conference on aging organized in Zurich in February by the Center for Strategic and International Studies.

Tokyo - Elderly persons in Japan aged 65 or older numbered 21 million as of October 1999. According to estimates by the Ministry of Health, Labor and Welfare, this elderly population will increase by more than 3 million persons every five years up to 2015. During the peak period of this increase, from 2010 to 2015, the population aged 65 and over will increase by approximately 4 million persons, pushing the total number of elderly citizens beyond 31 million by 2015.

A FEW YOUNG PEOPLE | Over the next 10 years Japan is likely to see a drop of nearly 4 million in the number of workers aged 15 to 29, while the number of persons aged 55 and up will grow by approximately 3.8 million. The workforce, too, is therefore likely to undergo further aging. Companies will thus find it crucial to address the structural changes to the labor supply that will be produced by "fewer young people and more older people."

In the 1980s many European countries attempted to reduce unemployment among younger persons by adopting a policy of encouraging early retirement by older workers. This generated higher costs in terms of unemployment benefits and pensions, and new social security costs added to companies' operating costs. In the end the policy forced down overall demand for employment and failed to produce greater employment opportunities for younger adults. The lesson learned from this bitter experience was that lessening the burdens faced by an aging society requires the continued employment of older workers and not their early retirement.

Though it is still a point of contention in Japan, the traditional lifetime employment system should fundamentally be maintained. When I was younger the mandatory retirement age was 55, but it is now 60. The age of eligibility for retirement benefits will likely rise in incremental steps to 65, and it is likely for the mandatory retirement age to move toward 65.

Under these conditions, however, it will become increasingly difficult to maintain the seniority-based system. By switching to a merit-based wage system, labor productivity will be improved and continued employment of the elderly will become possible without compromising corporate and industrial efficiency. We must discuss in further depth such questions as whether Japan should follow the US model of banning age discrimination.

To that end, last December the Labor Department decided to pursue the idea of abolishing age limits in recruitment and employment with the aim of achieving an age-free society, in which people can work irrespective of their age so long as they have a will and capacity to do so. Participation by the elderly in employment is essential for a vigorous economy in terms of both quantity and quality, the former because they help make up for a decline in younger workers and the latter because they bring to the market a tremendous diversity of skills and experience. Putting it in other terms, building an economic and social framework that encompasses the elderly as an indispensable labor resource is an issue that we must inevitably address.

OLD WORKERS | There are several key measures that must be taken to expand elderly employment. The first is eliminating the mismatch between labor supply and demand. While employment of the elderly makes sense from the standpoint of total supply and demand, it must be smoothly coordinated with actual employment needs in individual jobs. With the industrial structure set to undergo major changes, it will not be a simple matter to match up labor supply and demand. Job placement offices and temporary employment agencies can fulfill an important bridging function in Japan. Retraining elderly persons in new skills is also an important challenge, and the employment insurance system is being administered to extend its coverage to this area.

To make up for the labor shortages forecast to come, we should for the time being rely on vigorous elderly workers as well as encourage more women to seek employment. To that end, we need as a society to consider establishing childcare centers and taking other steps to allow women to both work and raise their children.
On the issue of immigrants, Japan has basically been the sender of people to other countries for more than 100 years. We are not used to accepting foreign workers or immigrants in our society. I, therefore, believe that it is a matter that requires careful study and deliberation, taking into account various issues such as possible social impact of accepting them.

In considering the economic impact on the national economy of the plunging birthrate and our rapidly aging society, some observers have suggested very gloomy scenarios, including higher social security burdens, reduced personal consumption, lower household savings rates, a falloff in labor productivity, and a decline in industry through decreased competitiveness. I will not be a party to such negativism.

INDUSTRY OF THE ELDERLY | On the contrary, we need to view our dropping birthrate and aging society as a potential engine for economic growth. The aging of societies will expand the industrial sector one might call "aged society industry" that is composed of not only medical and nursing care but also supplying the product to meet the needs of the aged, including barrier-free and universal design products, housework assistance and leisure activities. The Industrial Structure Council estimates that the market for these industries will climb from the present ¥39 trillion (about US$340 billion) to ¥150 trillion (about US$1.3 trillion) by 2025. One can see a growing number of energetic elderly people who are working and consuming significant amounts of goods and services.

As the door opens to a new century, I find myself, with a sense of solemnity, confronting many important issues. The term "aging society" itself seems to imply a stagnant society of old people. I believe the key to success for the first decade of the 21st century will be transforming this image to one of a bustling, cheerful long-lived society.

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