Retirement is for wimps

The thought of retiring after more than four decades made Hirofumi Mishima anxious. Instead of looking forward to ending his three-hour daily commute, Mishima wanted to work, even if it meant another hour on the train.

"Keeping a regular job is the most stimulating thing for me," says Mishima, 69, who spent six months trawling the vacancy boards at a Tokyo employment centre after retiring from his US$77,000-a-year job as an industrial gas analyst in 2009. "If I was at home all day, I'd get out of shape and my wife would fret about all the extra chores she'd have to do."

Mishima is one of 5.7 million Japanese older than 65 still in the workforce for money, health or to seek friends - the highest proportion of employed seniors in the developed world. While European governments struggle to convince their voters to sign up for longer work lives, Japan faces the opposite issue: how to meet the wishes of an army of willing elderly workers.

Japan's lower house passed legislation this month that would give private sector employees the right to keep working for another five years, up to 65. With the world's longest life expectancy, largest public debt and below-replacement birth rate, curbing spiralling welfare costs by keeping people in jobs longer may help defuse a pension time bomb that threatens to overturn or bankrupt governments in the developed world.

"The raising of the retirement age, it's a good thing, and more importantly, we have no alternatives," said Michael Hodin, a researcher at the Council on Foreign Relations in New York specialising in health policies and ageing populations. Current concepts of retirement don't make sense in the context of 21st-century demographics, and governments are looking to reframe the social contract, he said.

"If we don't do that, we're leading to a disaster," Hodin said.

The World Economic Forum went further in its Global Risks 2012 report, saying a scenario in which the largest population of retirees in history becomes dependent on already heavily indebted governments could bring lawlessness and unrest to formerly wealthy countries.

Efforts by Greece's government to reduce spending on pensions and health care sparked riots and strikes earlier this year.

Japan hopes to avoid going the same way, as life expectancy - predicted to exceed 90 years for women by 2050 - threatens to prolong the time seniors are drawing pensions.

Even without the new legal entitlement, people already continue working in Japan longer than in other developed countries. Men exit the labour market on average at 70 and women at 67, the Organisation for Economic Co-operation and Development (OECD) said in a report last year.

Within four decades, almost half the people in the world's third-largest economy will be 65 years or older, compared with one-in-four now. Japan's working population has fallen 3.9 per cent to 65.5 million people in 2011 from a peak in 1997, according to data from the country's statistics bureau. And at 1.4 babies per woman, the birth rate is below the two or more needed to stop the trend. From April, citizens will have to wait an extra year - until they are 61 - to become eligible for their old-age pensions, rising to 65 by 2025.

Welfare costs in Japan are projected to increase 36 per cent to US$1.9 trillion by 2025, the equivalent of 24 per cent of GDP.

Delaying the retirement age is one way Japan can plug a shortfall in pension provisions, said Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo. The deficit is a result of benefit miscalculations made in the early 1970s that led to snowballing public debt, he said.

"Japan's public-debt problem is just starting," Schulz said.

More than half of the 34 OECD's member nations have increased the starting age for pensions. Men in 17 states become eligible for pensions at 65, while more than a dozen countries are delaying it to 67 or later, as governments link pension-age to life expectancy, the OECD said this year.

"Today's retirees are living through what may yet prove to be a golden age for pensions and pensioners," the Paris- based group said. People in future will have to work longer before retiring and live off smaller public pensions, it said.

Japanese like Kazuyoshi Hirota have already accepted that fate. The 69-year-old works 24 hours a week as a manager-cum- janitor of an apartment building in central Tokyo. He retired seven years ago from his full-time security job at the head office of Asahi Group Holdings, a brewer.

"The pension isn't enough to live comfortably," said Hirota, who lives with his wife Yoko, a cleaner of the same age, in a two-storey suburban Tokyo house he bought 40 years ago for US$13,000. "Life is boring without work. My wife says the same."

Longer working lives do have downsides, including a reduction in per-capita productivity, said Peter Tasker, a founding partner of hedge fund Arcus Investment. "You are trying to increase the supply of workers even though demand isn't increasing," he said. "That probably means the wages go down for everybody."

The University of Tokyo's Institute of Gerontology is running projects to assess whether jobs at farms, nursing homes, restaurants and kindergartens enable seniors to enjoy a more active, healthier lifestyle, said Hiroko Akiyama, a professor at the institute. The researchers want to create a model that can be adopted across urban Japan, where ageing will accelerate as baby boomers retire, she said.

Worldwide, the proportion of people older than 60 years in the population is increasing at more than three times the total growth rate. Within five years, adults 65 years and older will outnumber children younger than five for the first time. By 2050, there will be two billion people 60 years or older, from 605 million in 2000, the World Health Organisation said.

"A transition towards an older society that took more than a century in Europe is now taking place in less than 25 years in countries like Brazil and China," WHO director general Dr Margaret Chan Fung Fu-chun told a meeting on gerontology in Havana in March. "The window for preparatory action has become much smaller."

It may be easier for Japan to accommodate older workers than elsewhere. Its unemployment rate is 4.3 per cent, compared with 8.3 per cent in the US and 11 per cent in Europe.

Komatsu, the world's second-biggest construction equipment maker, rehires 90 per cent of its retirees with a 40 per cent salary cut.

"I'm happy to keep workers after 65, but I don't think many are physically capable," CEO Kunio Noji, 65, says. "Also, it may take away jobs for younger people."