OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

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Labour market reform in Japan to cope with a shrinking and ageing population

Fundamental reform of traditional Japanese labour market practices is essential to cope with rapid population ageing and the era of 100-year lives. A shift to more flexible employment and wage systems based on performance rather than age would enable Japan to better utilise its human capital. Abolishing the right of firms to set mandatory retirement – typically at age 60 – would enable employees to extend their careers and reduce the link between wages and seniority. It would also facilitate a further increase in the pension eligibility age above 65, thereby helping to reduce poverty among the elderly. Life-long learning is another key element to extending careers. It is also crucial to address a range of issues that discourage the employment of women, namely the lack of work-life balance and shortages of high quality and affordable childcare and long-term care for the elderly. Fighting discrimination and gender stereotypes is also important to allow women to assume greater leadership roles. Coping with population decline also requires pursuing recent efforts to increase the role of foreign workers in Japan. Breaking down labour market dualism is crucial to expand employment opportunities for women and older people, while reducing income inequality and relative poverty.

This Working Paper relates to the 2019 OECD Economic Survey of Japan



Keywords: population ageing, labour force participation, female employment, mandatory retirement, older workers, childcare, Japanese economy, pension eligibility age, labour market, lifelong learning, non-regular workers, womenomics, dualism, labour shortages, foreign workers, work-life balance
JEL: J7: Labor and Demographic Economics / Labor Discrimination; J2: Labor and Demographic Economics / Demand and Supply of Labor; J8: Labor and Demographic Economics / Labor Standards: National and International; J3: Labor and Demographic Economics / Wages, Compensation, and Labor Costs
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