Japanese companies have long cut pay by about half when rehiring workers past the retirement age, but they will now have to pay the full amount unless they can show a clear reason. The change comes as workers rehired after retirement were brought under the country's "equal pay for equal work" rules. Unlike South Korea, Japan faces hiring shortages that extend even to older workers, and the measure is a response to that squeeze.
The Ministry of Health, Labour and Welfare put into effect on the 1st a revised "equal pay for equal work" guideline that was amended in April, according to Japan's Nihon Keizai Shimbun. Under the revision, non-regular employees can now ask employers to explain why their treatment differs from that of permanent employees doing the same work. Employers must also set standards for allowances, leave and benefits.
The revised guideline also bars companies from differentiating treatment for older workers on fixed-term contracts after retirement — known as shokutaku employees — solely on the grounds that they were switched to contract status. Japan had 9.43 million employed people aged 65 and over last year, a record high, and 76.1% of them were non-regular workers, meaning they fall under the new rules.
Japan has been pushing back the point of retirement since 2005, when it became the world's first "super-aged society," with people aged 65 and over making up more than 20% of the total population. A report released by the Ministry of Internal Affairs and Communications on the 20th of last month put Japan's population aged 65 and over at 36.24 million, or 29.6% of the total — the highest share on record.
While South Korea, which is heading toward super-aged status itself, has extended the retirement age through a wage peak system that reduces pay, Japan has focused on rehiring after retirement. The Japanese government introduced a law on stable employment of older people in 2006, requiring companies to choose one of three options to guarantee jobs up to age 65: abolishing the retirement age, raising it, or adopting a continued employment system that rehires workers after they retire. In 2021 it raised to 70 the age at which companies are expected to make efforts to secure employment. But older workers have filed lawsuits arguing that sharp pay cuts may be illegal when the work before and after retirement is essentially the same, and courts have issued rulings backing that view.
With shortages of university graduates worsening, companies are also turning to older workers for their experience. The ratio of job openings to job seekers across all industries in Japan was close to 1.2 in July, and reached as high as 7.9 in some construction occupations, pointing to a severe labor shortage, according to the Financial Times. Starting salaries for university graduates, which had been in the low 200,000 yen range, have been raised to between 250,000 and 300,000 yen (about 2.14 million to 2.57 million won), setting off a round of competition among large companies to lift entry-level pay. Wage increases in this year's spring labor offensive were also the largest in about three decades.
Nojima, a home appliance retailer, said on the 30th of last month that it had appointed two university students working part time as store managers, and that it would pay a monthly starting salary of 477,000 yen (about 4.197 million won) to new hires who have more than a year of part-time experience at the company and have delivered outstanding results. Against that backdrop, retirees with deep experience and familiarity with company culture have emerged as an alternative.
A growing number of companies are scrapping or raising the retirement age altogether. YKK, the world's largest zipper maker, abolished its retirement age — then set at 65 — in 2021. Shionogi, a major pharmaceutical company, will raise its retirement age to 65 from 2027 while allowing those aged 65 and over to work as permanent employees if they meet certain requirements. One challenge, however, is that corporate profits are being squeezed as companies raise pay for both younger and older workers without gains in productivity.
