SHARE THIS ARTICLE Share Tweet Post Email

The thought of retiring after more than four decades made Hirofumi Mishima anxious. Instead of looking forward to ending his three-hour daily commute, Mishima wanted to work, even if it meant another hour on the train.

“Keeping a regular job is the most stimulating thing for me,” said Mishima, 69, who spent six months trawling the vacancy boards at a Tokyo employment center after retiring from his $77,000-a-year job as an industrial-gas analyst in 2009. “If I was at home all day, I’d get out of shape and my wife would fret about all the extra chores she’d have to do.”

Mishima is one of 5.7 million Japanese older than 65 still in the workforce for money, health or to seek friends -- the highest proportion of employed seniors in the developed world. While European governments struggle to convince their voters to sign up for longer work lives, Japan faces the opposite issue: how to meet the wishes of an army of willing elderly workers.

Japan’s lower house passed legislation this month that would give private-sector employees the right to keep working for another five years, up to age 65. With the world’s longest life expectancy, largest public debt and below-replacement birthrate, curbing spiraling welfare costs by keeping people in jobs longer may help defuse a pension time bomb that threatens to overturn or bankrupt developed-world governments.

“The raising of the retirement age, it’s a good thing, and more importantly, we have no alternatives,” said Michael Hodin, a researcher at the Council on Foreign Relations in New York specializing in health policies and aging populations. Current concepts of retirement don’t make sense in the context of 21st century demographics, and governments are looking to reframe the social contract, he said.

‘A Disaster’

“If we don’t do that, we’re leading to a disaster,” Hodin said.

The World Economic Forum went further in its Global Risks 2012 report, saying a scenario in which the largest population of retirees in history becomes dependent on already heavily indebted governments could bring lawlessness and unrest to formerly wealthy countries.

Warning signs have started to appear. Unsustainable retirement expenses have helped push cities from Stockton, California, to Central Falls, Rhode Island, into bankruptcy. Illinois lawmakers last week failed to agree on cuts to help plug an $83 billion hole in the state’s pension plans that make them the nation’s most underfunded. Efforts by Greece’s government to reduce spending on pensions and health care sparked riots and strikes earlier this year.

Pension Time

Japan is taking steps to avoid going the same way, as life expectancy -- predicted to exceed 90 years for women by 2050 -- threatens to prolong the time seniors are drawing pensions.

Even without the new legal entitlement, people already stay working in Japan longer than in other developed countries. Men exit the labor market on average at 70 and women at 67, the Organization for Economic Cooperation and Development said in a report last year.

Within four decades, almost half the people in the world’s third-largest economy will be 65 years or older, compared with one in four now. Japan’s working population has fallen 3.9 percent to 65.5 million people in 2011 from the peak in 1997, according to data from the country’s Statistics Bureau. And at 1.4 babies per woman, the birthrate is below the two or more needed to stop the trend.

From April, citizens will have to wait an extra year -- until they are 61 -- to become eligible for their old-age pensions, rising to 65 by 2025.

Welfare costs in Japan are projected to increase 36 percent to 148.9 trillion yen ($1.9 trillion) by 2025, the equivalent of 24 percent of gross domestic product, according to Cabinet Office documents released in March.

Miscalculated Benefits

Delaying the retirement age is one way Japan can plug a shortfall in pension provisions, said Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo. The deficit is a result of benefit miscalculations made in the early 1970s that led to snowballing public debt, he said.

“Japan’s public-debt problem is just starting,” Schulz said.

More than half of the 34 OECD’s member nations have increased the starting age for pensions. Men in 17 states become eligible for pensions at 65, while more than a dozen countries are delaying it to 67 or later, as governments link pension-age to life expectancy, the OECD said in a report this year.

‘Golden Age’

“Today’s retirees are living through what might prove to have been a golden age for pensions and pensioners,” the Paris-based group said in an editorial accompanying the report. People in future will have to work longer before retiring and live off smaller public pensions, it said.

Japanese like Kazuyoshi Hirota have already accepted that fate. The 69-year-old works 24 hours a week as a manager-cum-janitor of an apartment building in central Tokyo. He retired seven years ago from his full-time security job at the head office of Asahi Group Holdings Ltd., a brewer.

“The pension isn’t enough to live comfortably,” said Hirota, who lives with his wife Yoko, a cleaner of the same age, in the two-story suburban Tokyo house he bought 40 years ago for 4 million yen -- about $13,000 at the time. “Life is boring without work. My wife says the same.”

Japan, where babies born today can expect to live to 83, has the highest proportion of working seniors in the developed world: 20 percent of people over 65, compared with 14.5 percent in the U.S., 6.3 percent in the U.K., 3.4 percent in Germany, 3.1 percent in Italy and 1.3 percent in France, according to data compiled by Japan’s Statistics Bureau.

Health Costs

Longer working lives do have downsides, including a reduction in per-capita productivity, said Peter Tasker, a founding partner of hedge fund Arcus Investment Ltd. “You are trying to increase the supply of workers even though demand isn’t increasing,” he said. “That probably means the wages go down for everybody.”

Still, keeping senior workers can save on health costs. Nagano in central Japan has the highest proportion of working seniors of any prefecture and its elderly spend the least on health care, according to a 2007 white paper from the Japanese health ministry. In contrast, Fukuoka in the southwest has one of the lowest ratios of working seniors in the country and the highest health costs.

Aging Planet

The University of Tokyo’s Institute of Gerontology is running projects to assess whether jobs at farms, nursing homes, restaurants and kindergartens enable seniors to enjoy a more active, healthier lifestyle, said Hiroko Akiyama, a professor at the institute. The researchers want to create a model that can be adopted across urban Japan, where aging will accelerate as baby boomers retire, she said.

Worldwide, the proportion of people older than 60 years in the population is increasing at more than three times the total growth rate. Within five years, adults 65 years and older will outnumber children younger than 5 for the first time. By 2050, there will be 2 billion people 60 years or older, from 605 million in 2000, the World Health Organization said.

Aging is occurring fastest in low- and middle-income countries, according to the Geneva-based agency, which dedicated this year’s World Health Day to aging and health.

“A transition towards an older society that took more than a century in Europe is now taking place in less than 25 years in countries like Brazil and China,” WHO Director-General Margaret Chan told a meeting on gerontology in Havana in March. “The window for preparatory action has become much smaller.”

It may be easier for Japan to accommodate older workers than elsewhere. Its unemployment rate is 4.3 percent, compared with 8.3 percent in the U.S. and 11 percent in the Eurozone, according to data compiled by Bloomberg.

Komatsu, Mitsubishi

Still, companies would prefer not to be required by law to retain older workers, said Yasuchika Hasegawa, head of the Japan Association of Corporate Executives, the nation’s second-biggest business lobby.

“It’s difficult for businesses to keep everyone,” said Hasegawa, 66, who is also chief executive officer of Takeda Pharmaceutical Co., Asia’s largest drugmaker. Employers should instead create an environment that enables the elderly to work until they are about 70, he said.

Komatsu Ltd., the world’s second-biggest construction-equipment maker, rehires 90 percent of its retirees with a 40 percent cut in salaries. “I’m happy to keep workers on after 65, but I don’t think many are physically capable,” Chief Executive Officer Kunio Noji, 65, said in an interview. “Also, it may take away job opportunities for younger people.”

Mitsubishi Estate Co., Japan’s largest developer by market value, says 11 percent of its workers are over 60 years old and four out of five of those workers stay for another five years.

Precious Resource

“When the working population is falling, the elderly become a precious part of the workforce, and it’s meaningful to hire people with motivation,” the Tokyo-based company said in an e-mail.

That’s not something industrial-gas analyst Mishima lacks. Fifteen days a month, he rises at 4 a.m. and commutes two hours each way to work an 8-and-a-half-hour shift overseeing the supply of hydrogen gas to buses.

“Before my retirement, I worked for the company and got satisfaction from contributing to its profit and growth,” he said. “Now, I work for my health. I’m very happy my job gives me mobility and helps me stay active.”