Employment of senior workers in Japan

ABSTRACT The Japanese HRM practices and policies resulting from the compromises between labor, management, and the state emerged after WWII and coalesced in the 1960s. The subsequent emergence of a very cohesive, stable, and dynamic employment system is largely credited with playing an important role in Japan’s economic success and the stability of Japanese society in the postwar period. The treatment of senior workers after mandatory retirement occupied a specific place in this system. A mix of institutional, socio-cultural, economic, and demographic factors created a virtuous circle, and Japan was considered a model of management of those retired workers. Companies were able to maintain employment for many of them in relatively good social and economic conditions beneficial for both parties, even after mandatory retirement, and this assured a good transition to definitive retirement. However, despite Japan’s relative success in this regard, this paper exposes why the traditional HRM policies and practices are now considered socially and economically unsustainable in the treatment of retired senior workers. It argues that Japan cannot afford under-utilizing senior workers during the pre- and post-retirement periods of their career in the way that traditional policies and practices have institutionalized. Not only does Japan’s economy need senior workers, but not giving them the opportunity to maintain decent standards of living would have dire social and economic consequences. This calls for revamping the HRM system, so that the talent of senior workers can be used for their own benefit, while contributing to their employers and to society at large.