OECD calls for abolition of mandatory retirement age in Japan

The Organisation for Economic Co-operation and Development (OECD) has called for the abolishment of the mandatory retirement age in Japan to expand the talent pool there amid a shrinking workforce.

The OECD Economic Survey of Japan said the mandatory retirement age system of employers discourages the employment of older and female workers, as well as labour mobility.

"Abolishing the right of firms to set mandatory retirement, typically at 60, would increase employment and weaken the role of seniority in setting wages, which would also benefit women and younger workers," the report said.

Such reform, however, should also be accompanied by measures to re-skill older workers, according to the report.

Japan has been allowing employers to implement a mandatory retirement scheme to make room for younger employees in an organisation. But a survey by Kakehashi Skysolutions last year revealed that 66% of 1,100 individuals in their sixties remain employed.

The survey, as reported by Nippon, revealed that the most common employment status for these employees were as contract staff.

"Continuing Work Style reforms, including equal pay for equal work, would also support working conditions for older workers who are shifted to non-regular status at age of 60," the OECD report said.

Addressing the worker shortage, birth decline

The findings come amid previous reports that Japan will suffer a shortage of 11 million workers in 2040.

The OECD report said more efforts are needed to increase labour force participation among women and older people, as well as attract more talent foreign workers to limit the challenge.

"Past labour market reports have raised employment, but more is needed to break down labour market dualism," the report said.

It underscored that the high share of young and female workers in non-regular jobs, with lower wages and career prospects, weaken female labour force participation, contribute to the wage gap, as well as delay family formation.

Japan has been making efforts, such as extending subsidy, to encourage usage of paternity leave and boost the country's low birth rates.

According to the OECD, reduced earnings on leave and fears of negative career repercussions has been causing the low take-up on paternity leave on organisations.

"Policies to support families and children, including improving work-life balance, could help reverse the decline in the fertility rate," the report said.