Mandatory retirement is bad public policy: new book

Retirement in Japan and South Korea book coverAmong the countries in East Asia with aging populations, mandatory retirement makes little economic sense, according to Retirement in Japan and South Korea: The past, the present and the future of mandatory retirement (2015).

By looking at the past developments and recent reforms of retirement policies in these two countries, this book digs deep into the social, economic and political conflicts that surround the involuntary retirement of employees at relatively young ages. Its policy recommendations are applicable not only to Japan and South Korea, but also to China and beyond.

“Mandatory retirement made some sense when there were many young workers and few old workers. However, because of rapid population aging in East Asia and other parts of the world, forcing workers into early and involuntary retirement is poor public policy. One outcome of doing so is leaving many older people in poverty,” says political science and public policy and administration Professor Thomas Klassen.

Klassen, who authored Retirement in Canada (2013) and specializes in retirement and income security policies, co-edited this book with sociology and social gerontology Professor Masa Higo from Japan’s Kyushu University.

Thomas Klassen
Thomas Klassen

“Retirement in Japan and South Korea is dramatically different from that of Canadians,” says Klassen. “Most workers in those two countries experience a two-step retirement. First, in Korea they are forced to retire in their mid-50s, or even earlier, and in Japan at age 60. Thereafter, the second step involves many finding some kind of low-paid, precarious employment, such as driving a taxi, working as a security guard and as a small-scale entrepreneur – grocery store or dry cleaner operator – or being hired on short-term contracts to earn enough income to support themselves and their families.”

As a result, he adds, the average age of final retirement is driven up to 71 in Korea and 69 in Japan, compared to 64 in Canada.

Klassen notes that mandatory retirement exists in most countries because employers prefer to hire younger workers at lower wages than they would pay older workers.

“Young people sometimes feel that older workers, by continuing to remain employed, are denying jobs to younger workers. Although this makes intuitive sense, it is actually an economic fallacy,” Klassen says. He adds that variations of this argument have been, and still are being, used to argue to keep women and immigrants out of the workforce because women will take jobs away from men and immigrants will take jobs away from locals.

“Economic theory and the experience of nations that have eliminated mandatory retirement are clear: Keeping more people employed means more jobs are available in the economy. For example, as women entered the labour force in large numbers in the 1970s in North America, all kinds of new jobs were created in daycares, restaurants, auto assembly plants and so forth,” Klassen says.

His book also includes chapters on the United Kingdom and China, the former having recently abolished compulsory retirement and the latter where it is rampant. Aside from the U.K., only a few other countries, such as Canada, the U.S. and Australia, allow workers to decide when to retire.

“Although Canada recently banned mandatory retirement for most workers, debates continue about retirement, pensions and old-age poverty,” says Klassen. “Canada’s aging population — as the baby-boom generation reaches the traditional retirement age – means that retirement, in all its forms, will become a more prominent public and private matter. Learning from the experience of other nations is essential to ensure the best public policies and strengthening income security for older Canadians.”

Retirement in Japan and South Korea was partially funded by the York Centre for Asian Research. A book launch will take place on June 3 in Seoul, South Korea. A dozen York students enrolled in Klassen’s LA&PS summer abroad course, titled South Korea: The Politics of Youth and Old Age, will attend.