Table Speech

Conditions for Life-Long Active Society

June 19, 2013

Mr. Atsushi Seike
President, Keio University

 In a life-long active society, those who are willing and competent can fulfill their potential regardless of their age. It is imperative to make Japan a life-long active society, because our country is ageing at an unprecedented scale and speed.

 According to the Population Census issued by the Ministry of Internal Affairs and Communications, the proportion of people aged 65 and over already accounts for 24.7% of the total population as of May 1st this year. The ratio is predicted to exceed 33% in the early 2030s and by mid-21st century, the figure will reach 40% forming an inverted population pyramid. These figures indicate Japan will continue to have the highest percentage of elderly in the world. If I mention one country that is predicted to catch up with Japan in the latter half of this century, it is South Korea that is affected by an even sharper decline in its birth rate.

 Japan is also ageing at an alarming and incomparable speed. The speed of demographic ageing is measured against “the number of years it takes for the 65-and-over age group to rise from 7% to 14%.” Just to tell you, a country becomes an “ageing society” when the ratio exceeds 7%, an “aged society” when it exceeds 14% and a “super-aged society” when over 21% of the population is made up of elderly people. Japan became an “ageing society” in 1970 and an “aged-society” in 1994, just after 24 years. This is an astounding speed, 4 times faster than France that took 115 years and 3 times faster than the US that took 72 years.

 Population projection is the most predictable among various economic variables. My personal friend, Professor Earnest Berndt of MIT, rightly pointed out that “the issue of ‘demographic ageing’ that we face today has been predicted several decades ago, so we are held accountable for taking responsible and appropriate countermeasures.”

 “Demographic ageing” itself is a dream of mankind, as it reflects social and economic success. For example in Japan, right after World War II in 1947, men had an average life expectancy of 50 years and women 54 years. Today, thanks to our economic development that brought rise in national income as well as improvements in clothing, food, housing and medical services, life expectancy has exceeded 80 years for men and 86 years for women.

 Another reason behind demographic ageing is a “decline in the birth rate.” Right after the War, total fertility rate of woman in Japan was 4.5 children. Today, it has dropped to the sub-replacement level of 1.41 and the Japanese population will keep declining. Japan has followed the typical pattern of “high rates of birth and infant mortality” replaced by “low birth and premature death rates” in accordance with rising per-capita income. The recent decline in birth rate, however, has reached an excessive level in Japan. The major factor is that women incur a great economic loss as a result of marriage and child-rearing, which can total 200 million yen throughout their lifetime. We must take vigorous measures to assist and encourage women to continue working even after marriage and child-rearing.

 Japan will continue to increase in longevity with fewer children for at least another quarter of a century, thus we have to modify our behavioral pattern and system towards sustainable economy and society. For example, the “pension system” must address the needs of an inverted population pyramid, that includes raising the pensionable age and encouraging senior employees to continue working to reduce the burden on the future generations. You can make positive contributions to macroeconomic growth by remaining active and productive in the society.

 Increased earnings from work will also stimulate consumption and demand. The good news about Japan is that older employees are more motivated to continue working than in other countries. For example, 76% of males in Japan aged 60-64 years old are willing to work, while the figure for UK and USA is about 60%, Germany is 40 % and France remains 20%.

 To enable those willing to remain in the workforce, we must redress our traditional employment practices of “mandatory age-limit retirement” based on the “seniority-based wage and benefits” system. Extending the mandatory retirement under the current system will force companies to shoulder higher costs to pay for high-waged senior workers and managers. It is thus imperative to level out the current seniority-based wage hike system.

 There is much to learn from small-and-middle sized enterprises (SMEs) that make the best use of expertise and experience of senior workers, without age limit for retirement. SMEs also have the know-how to hand down professional skills of senior workers to the younger generation. Big companies are urged to introduce such practices, while modifying the seniority-based wage system.

 Developed countries around the world face the common challenge of demographic ageing. Each country is striving to promote employment of its senior citizens. The World Economic Forum Global Agenda Council on Ageing is preparing the “Ageing Preparedness Index” to help countries identify what is needed to become age-friendly countries. According to the international standard, Japan is one of the well-prepared countries addressing the problems of ageing. Japan leads the world in “ageing” and thus we can be of reference to other counties by providing a good role model in response to this global issue. I hope to tackle various issues together with you here today with profound insight and wisdom.