1. Robert L. Clark North Carolina State University

2. Retirement Transitions: Challenges, Anomalies, and Solutions Demographic Realities Career Jobs, Mandatory Retirement, Government Policies Employee Preferences and Bridge Jobs National Need for Later Retirement

3. Demographic Realities Life expectancy Has risen rapidly over the past four decades 1970: men 69.3 women 74.7 2013: men 80.2 women 86.6 Highest in the world Low Fertility Rapid decline to among the lowest in the world 1970 2.13; 1990 1.54; 2005 1.26 Slight increase to 1.43 in 2013

4. Life Expectancy at Birth by Country

5. Demographic Realities Little immigration National preference for low rates of immigration Super Aging Declining number of youths Increasing number of elderly Declines in absolute size of the population; projected decline from 128 million to 117 million in 2030 Rapid increase in the proportion of the population age 65 and over from 23 percent to 33.4 percent in 2035

6. Changes in the Population Pyramid

7. Trends in the proportion of major three age groups: Medium-fertility (medium-mortality) projections

8. Population Trends and Age Structure Changes: 1920 to 2060

9. Population Statistics for Japan: 1950-2013

10. Career Jobs, Mandatory Retirement, Government Policies Traditional Employment System: Career Jobs and Lifetime Employment Hire high school and college graduates Low turnover rates Invest in human capital Seniority based pay Lazear type contract must have an end point

11. Career Jobs, Mandatory Retirement, Government Policies Extensive use of mandatory retirement at relative young ages - change from 55 to 60 Increase in LFP for persons age 55 to 59 Flattening of age earnings profiles Mandatory retirement a binding constraint on employment of older persons Hitachi ends seniority based salary system, Sony to follow next year Government policies to promote later retirement – encouraging increase to 65

12. Distribution of Mandatory Retirement Age in Japanese Firms

13. Employee Preferences and Bridge Jobs Explaining an anomaly Widespread use of mandatory retirement at age 60 Highest LFP in the developed world Bridge jobs and preference for work by older Japanese, especially men

14. Labor Force Participation Rates of Older Men by Age

15. Female LFPR

16. Employee Preferences and Bridge Jobs Older Japanese have high preference to remain in labor force Very high LFP rates until mandatory rate age of 60 Rates remain high up to age 70 Average age of retirement (age at which 50 percent are out of LF) is 69.5 for men and 66.5 for women Much higher average of retirement compared to other developed countries – Sweden is next but average age is almost 4 years younger

17. Employee Preferences and Bridge Jobs Retirement transition takes several forms: 1. Re-employment is common. Workers are required to retire at mandatory retirement age but are then re- employed at lower wages and lower status jobs 2. Komatsu rehires 90% of its retirees but at 40% lower wages 3. Rising incidence of self-employment; 20.8 percent of workers 55 to 64 are self-employed while 51.9 percent for those 65 and over

18. Employee Preferences and Bridge Jobs 3. Move to related firms or subsidiaries a. more common for higher level management employees b. more common for those with greater job tenure 4. Bridge Jobs – typically smaller firms a. older workers often plan retirement transitions b. invest in retraining c. those with more financial literacy are more likely to plan and invest

19. Japanese Study of Aging and Retirement Longitudinal study of portions of Japan Not nationally representative Changing geographical coverage Examine the change in employment between survey years (2007, 2009, 2011) Consider workers 50 to 59 in 2007 and workers in new cohort who were 50 to 59 in 2009

20. Japanese Study of Aging and Retirement 255 individuals left career jobs between the survey years 32 percent left labor force 27 percent were re-hired by career firm 41 percent moved to bridge jobs

21. Japanese Study of Aging and Retirement Since retirement rates are very small until workers reach the age of mandatory retirement, a better picture of the transition can be shown by focusing only on workers age 58 and 59 in a survey year so by the next survey they have passed the age of mandatory retirement

22. Japanese Study of Aging and Retirement Work status in next survey of employees aged 58-59 in survey year 48.5% Not retired, same employer 16.4% Retired but rehired by career employer 17.6% Bridge job 17.6% Not working

23. National Need for Later Retirement Super aging of population composed of few younger persons entering the labor force and low mortality among the elderly Absolute decline in population Increased LFP of older persons one method of maintaining national economic growth