How can Japan turn its ageing workforce into an advantage?

Japan is facing a talent shortage crisis.  

As the country’s birth rate hits record lows, organisations are likely to face a shortage of more than 11 million workers by 2040, a study by Recruit Works Institute has found.

The working age population is expected to rapidly decline from 2027 – shrinking 20% from 2020 to 59.8 million by 2040 – even as labour demand remains steady.

This a major issue for the world’s third-largest economy, which has seen more three decades of economic stagnation resulting in some of the weakest wage growth in the developed world.

To address the labour shortage, Prime Minister Fumio Kishada has pledged around US$7.6 billion to train workers for more high-skilled jobs in the next five years. He also recently approved a plan to expand the country’s skilled worker visa system, opening the pathway up for more foreigners to gain permanent residency.

Like other governments, Japan is recognising the need to integrate older people into the workforce. The Labour Act supports older adults to work until age 70, urging employers to raise mandatory retirement age to 70 or in some cases abolish retirement all together.

Some companies in Japan are already on board, scrapping employee age limits as they look to fill vacancies in a tight labour market.

Zipper maker YKK Group recently eliminated its retirement age, while electronics retailer Nojima Co. raised its retirement policy from 65 to age 80 in 2020, before abolishing the age limit altogether – allowing older workers to continue work on a case-by-case basis. The company provides a programme of shorter hours, five hours a day, four days a week, for this group of workers.

Turning the problem of an ageing population into the solution – by harnessing the skills of older workers – makes perfect sense.

Especially given the numbers.

By 2031, Japanese workers 55 and older will reach nearly 40% of the workforce. This is 13% higher than the US, 11% higher than Germany, and 15% higher than both the UK and France, according to a new study from Bain – which estimates that around 150 million jobs will shift to workers 55 and older by the end of the decade.

“Populations are ageing; work lives are lengthening. Fewer young people are entering the workforce, due partly to lower fertility rates, partly to longer education,” the report states.

“A long-term trend toward earlier retirement is slowly going into reverse.”

In its new report, Bain acknowledges that while many companies are increasingly focusing on recruiting and retaining older workers, few actually recognise the changing priorities and motivations of older workers – and even fewer invest in them.

“It’s rare to see organisations put programmes in place to integrate older workers into their talent system,” Bain said.

“The good news is that, with the right tool kit and mindset, ageing workforces can help employers get ahead of their talent gaps and create high-quality jobs that turn older workers’ skills into sources of competitive advantage.”

Understand older workers in order to empower them

Bain urges organisations to design programmes and policies that not only embrace the strengths of older workers, but also fulfil their motivations ensuring retention and benefits across the board.

As well as understanding what motivates them, and allowing them to do what they do best, Bain recommends creating a re-skilling program for your next 10 years of capability needs.

Bain research finds that while older workers in developed markets are primarily motivated by good compensation before the age of 60 – after this, interesting work becomes the number one job attribute, while both autonomy and flexibility significantly increase in importance.

A Bain study of 40,000 workers in 19 countries found most over-55s fall into two worker types: Artisans and Givers. While Artisans are mainly motivated by mastering their craft and wanting to do what interests them, Givers feel rewarded by seeing their actions make a positive impact in the lives of others.

Far more older workers now say they plan to reduce their working hours too, with part-time hours seen as the perfect stepping-stone to retirement for this age group.

And while training and development is less important to this age group than younger groups, older workers are still eager to learn, if the training program appeals to their motivations and interests.

The Japanese companies getting it right

While still few and far between, more companies are starting to design specific roles suited for an older worker while still recognising the intrinsic motivations of each individual.

Mitsubishi Corporation has created a Career Design Center exclusively for employees aged 60 and older, offering custom training, job matching, and individual consultation services for senior workers.

Meanwhile, Tokyo Gas runs its Grand Career System with similar objectives, for all employees over 50. The programme provides career development support, training, and one-on-one mentoring.

As a result, more than 90% of Tokyo Gas workers facing mandatory retirement were rehired by the company or its subsidiaries.

Electronics retailer Nojima Co. provides a programme of shorter hours, five hours a day, four days a week, for this group of workers.

Tokyo Community Corp, a company that maintains apartment complexes and other buildings, has also created part-time positions for workers up to 77 years of age. As of March 2021, nearly half of its 11,322 employees were aged 65 or older.

The company also offers an extensive training programme and a reward of YEN 5,000 or more for acquiring real estate-related qualifications and they have considered and adapted working conditions to suit.