[Retirement Age Extension, Time to Choose] Japan Employs Workers Up to 70... Germany Says "Delaying Retirement Secures 2.5 Million Workers"

Countries Raise Retirement Age in Response to Declining Workforce
Due to Low Birth Rates and Aging Populations

Countries around the world are extending the retirement age in response to declining workforces caused by low birth rates and aging populations. Some countries have abolished mandatory retirement altogether, while others allow individual companies to retain employees beyond the official retirement age through separate contracts, as part of efforts to secure sufficient labor.

According to the OECD Public Pension Report, as of 2022, the average retirement age in OECD countries?the age at which a person who started working at 22 becomes eligible for a pension?was 64.4 years for men and 63.6 years for women. However, for those born in 2000, the estimated average retirement age is projected to rise to 66.3 years for men and 65.8 years for women in OECD countries.

This trend of raising the retirement age is a response to labor shortages and increased fiscal burdens caused by population aging. In OECD countries, there were only 21 people aged 65 or older per 100 people of working age (20?64) in 1994, but this figure rose to 33 in 2024. By 2054, it is expected to reach 55 people aged 65 or older per 100 people of working age.

According to research by the Urban Institute, extending the retirement age leads older workers to delay retirement in order to receive greater social security benefits. This can result in increased production of goods and services across the economy, improved standards of living after retirement, and expanded income tax revenue.

Japan is often cited as a leading example of a country where older workers are well integrated into the labor force. In 2012, Japan amended the Elderly Employment Stabilization Law, setting the statutory retirement age at 60 but allowing employees to work until 65 if they wish. In 2020, the law was revised again, requiring companies to make efforts to employ workers up to age 70.

Although retirement at age 70 is not yet universal, major Japanese companies are increasingly employing workers aged 65 and older. Meiji Yasuda Life Insurance decided last year to raise the retirement age for office workers from 65 to 70, with plans to introduce the new retirement system starting in 2027. Since August last year, Toyota Motor has implemented a reemployment system for all employees aged 65 and older. While Toyota's official retirement age is 60, employees could previously be reemployed until 65, but this will be extended to 70.

According to the Japanese Ministry of Health, Labour and Welfare, 99.9% of companies implemented measures to secure employment for older workers up to age 65 last year. The percentage of companies taking measures to secure employment up to age 70 was 31.9%.

In Germany, the statutory retirement age, which is currently 66 for those born in 1959, will be raised to 67 by 2031. In September 2024, Germany implemented a pension reform to extend the retirement age. Enzo Weber, a researcher at the Institute for Employment Research (IAB), estimated that if the labor force participation rate among those over 60 could be raised to the level of those aged 55, Germany could secure an additional 2.5 million workers, calling it "great potential."

The new German government is also actively encouraging the employment of older workers. Pensioners who wish to continue working after reaching retirement age will be eligible for partial income tax relief of up to 2,000 euros (about 3.16 million won) per month. Temporary employment restrictions for retirees will also be eased.

Other European countries are also raising the retirement age to reduce the fiscal burden of pensions and other government expenditures. France raised the retirement age from 62 to 64 through pension reform in 2023. Spain plans to raise the statutory retirement age to 67 by 2027.

China, a populous country where the retirement age has been relatively low, also extended the retirement age starting in January this year. The statutory retirement age for male workers was raised from 60 to 63. For female office workers, it was raised from 55 to 58, and for female blue-collar workers, from 50 to 55. China also introduced a "flexible retirement system" that allows employees and employers to agree to extend employment for up to three additional years upon reaching the statutory retirement age. This measure aims to address pension deficits. The Chinese Academy of Social Sciences has warned that, under the current system, pension funds could be depleted by 2035.

Some countries have no mandatory retirement age at all. The United States and the United Kingdom abolished mandatory retirement in 1986 and 2011, respectively, to prevent age discrimination. Taiwan also has no mandatory retirement age. In response to declining labor forces, Taiwan passed a labor law amendment last year that removed the provision limiting the retirement age to 65.