“Plugging the Labor Gap” Japan Expands Senior Employment Amid Super-Aging, with Major Economies Following Suit

With “one in three citizens elderly,” Japan’s aging accelerates, heightening labor shortage risks
Tokyo steps up institutional reforms as industries extend, abolish, and reconfigure retirement systems
Major economies move in lockstep on retirement age extensions, signaling a global labor market shift

Japan’s demographic aging is deepening by the day. As persistently low birthrates sharply erode the working-age population—defined as those aged 15 to 64—the proportion of elderly citizens continues to rise steadily. With a contraction in labor supply increasingly viewed as a structural certainty, the Japanese government and corporate sector are expanding the utilization of senior workers through reemployment schemes, retirement age extensions, and the abolition of mandatory retirement, seeking to mitigate mounting labor shortages.

Japan’s Rapidly Aging Society

According to data released on the 5th by Japan’s Ministry of Internal Affairs and Communications, the number of centenarians stood at 99,736 as of September last year, an increase of 4,644 from the previous year. Japan has tracked the centenarian population annually since 1963 ahead of Respect for the Aged Day, and the figure has risen uninterrupted for 55 consecutive years—surpassing 1,000 in 1981, 10,000 in 1998, and 50,000 in 2012.

Over the same period, the population aged 65 and above totaled 36.19 million. While this marked a decline of 50,000 from the previous year, the proportion of elderly within the total population nonetheless rose by 0.1 percentage points to a record 29.4%, reflecting the impact of sustained low birthrates. In 1950, just one in 20 Japanese citizens was elderly; by 1985, the figure had reached double digits at 10.3%, and by 2005—only two decades later—it had doubled again to 20.2%. Japan’s National Institute of Population and Social Security Research projects that, should current trends persist, elderly citizens will account for 37.1% of the total population by 2050.

As the population structure shifts, labor shortages across Japanese industry are intensifying. The Recruit Works Institute warned in its 2023 “Labor Supply and Demand Simulation Report” that Japan’s labor force could shrink by approximately 12% by 2040 compared with 2022, leaving a shortfall of more than 11 million workers. The working-age population is expected to begin a steep decline from 2027, falling to around 59.8 million by 2040—roughly 20% lower than in 2020.

Government Push to Secure Senior Employment

To secure employment opportunities for older workers and cushion market disruptions, the Japanese government has pressed ahead with institutional reforms. A key measure was the 2004 revision of the Act on Stabilization of Employment of Elderly Persons, which mandated that companies with retirement ages below 65 implement one of three options—continued employment, retirement age extension, or abolition of mandatory retirement—to ensure employment until age 65. In 2021, the law was revised again to impose a “best-effort obligation” on employers to provide work opportunities up to age 70 for those who wish to continue working. From April last year, employment until age 65 for willing workers became fully mandatory.

Corporate adoption of senior employment has gradually expanded in response. A June survey by Japan’s Ministry of Health, Labour and Welfare covering firms with 21 or more employees found that 34.8% of the 237,700 responding companies offered employment opportunities to workers aged 65 to 70—an increase of 2.9 percentage points from the previous year. Among the approaches adopted, post-retirement reemployment on contract terms under a “continued employment system” was most common at 28.3%, followed by abolition of mandatory retirement at 29.5%, while direct retirement age extensions accounted for 2.5%.

Japan has also operated a “continued employment benefit for older workers” since 1995, providing wage supplements via employment insurance to workers whose pay declines beyond a certain threshold after age 60 due to reemployment or retirement age extensions. According to a report titled Japan’s Retirement Policy: A Comparative Perspective with Korea by the National Assembly Futures Institute, wages for senior workers at firms that extended retirement ages averaged 78.3% of their level at age 60. At firms that opted for reemployment on contract terms without extending retirement, senior wages fell to just 59% of their age-60 level.

A Structural Shift in the Global Labor Market

The momentum toward active employment of older workers becomes even clearer when examining individual corporate cases. Mitsubishi UFJ Bank introduced a policy in 2024 granting reemployed retirees pay increases of up to 40%, expanded their working schedules to five days per week, and assigned them roles with substantive responsibility. Japan Airlines (JAL) guarantees senior employees the same pay levels they earned prior to retirement, and in some cases pays high-performing ground staff annual salaries exceeding approximately $67,000.

This strategic embrace of senior labor is not confined to Japan. China is advancing plans to raise statutory retirement ages by 2040—lifting men from 60 to 63 and women from 55 to 58. Singapore, which raised its retirement age to 62 in 1999 and to 63 in 2022, aims to further adjust the statutory threshold to 65 by 2030. In South Korea, lawmakers are debating a phased increase of the legal retirement age from 60 to 65, though deep divisions between labor and management have thus far stalled tangible progress.

Europe is also moving in the same direction. Germany has been gradually extending retirement ages since 2007 and plans to raise the current benchmark from 66 to 67 by 2029, aligning the statutory retirement age with the public pension eligibility age, which will also increase to 67 by that year. Sweden raised its retirement age from 65 to 67 in 2023, while France passed pension reform legislation the same year to increase the retirement age from 62 to 64 by 2030.