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Unexpected Non-Retirement of Japanese Creates Business Tension, Opportunity

16 September 2010—2007 was the year the long-awaited Japanese labor crisis failed to materialize. Japanese Baby Boomers did not begin retiring en masse as expected; rather, they have continued working.

This, though, has only accentuated other business and social issues in Japanese culture.

In Japan, there is a significant disconnect between the official retirement age and the effective retirement age. Half a century ago it was typical for Japanese workers to continue working well past retirement age, with employees retiring one day and then being offered part-time or longer-term contract work the next. Only in recent years has the phenomenon of permanent retirement at a relatively younger age become prominent.

In response to the "Year 2007 Problem" (see Aging, Shrinking Labor “Problem” Forces Japanese Human Resource Innovation) the Japanese government has sought to push out the target mandatory retirement age from 60 to 65. While critics have claimed that this tactic will only delay the inevitable, prompting a "Year 2012 Problem," in practice, Japanese companies have taken the matter quite seriously. For example, the vast majority of Japanese employers (85.6%) have introduced continuous employment systems to retain their older workers.

Now, though, as older workers remain on the job longer, they are finding that their jobs are changing. "Younger employees, previously lower within a company’s hierarchy, now work in higher positions and are even sometimes direct superiors to their elders," Kohlbacher explains. "Older workers, when rehired, are often managed by former colleagues and even subordinates; hence these older workers are often ranked lower in the hierarchy than younger employees - a difficulty in Japan because of the strongly ingrained seniority system."

While challenging on many levels, the Japanese case also presents opportunities for learning, because Japan is ahead of most of the world in terms of demographic change. The reformulation of work culture and individual roles offers businesses an occasion for innovation, both internally through managing human resources, and in taking advantage of new markets.

"The aging of the workforce presents many potential business opportunities for other countries (like the U.S.) to do business with Japanese baby boomers and other younger generations," comments Masa Higo, Research Affiliate for the Sloan Center on Aging & Work's Generations of Talent Study. "For example, some U.S.-based retirement insurance plans might be attractive to some Japanese people. Also, the Japanese baby boomers are known for being very familiar with and indeed in favor of American pop culture back in the 60s and 70s (e.g. rock music and films). So, some pop-culture related products and services might be one of the areas to look into."

"In the end, it's about consumer welfare, business success aside," says Kohlbacher. "The outcome should be a better society, with better opportunities to enjoy their longevity."

Florian Kolbacher presented on Management Implications of Demographic Change in Japan: An Innovation Perspective in August 2010. For more on the subject, please read Florian’s article “Baby Boomer: What happened to the ‘Year 2007 Problem?’ in the April 2010 edition of ACCJ Journal.