Introduction:
The developed nations have encountered or eventually will encounter severe
population aging, where the ratio of old aged dependents is notably high.
Most of the developed nations reached economic prosperity after reductions
in the Crude Death Rate due to medical and healthcare improvements, and
life expectancy surged as well. Consequently a boost in the population occurred,
causing an increase in the labor force participation, which then leads to
a growth in total income and GDP. However, improvements in living standards,
education, salaries, and pensions have caused a decrease in the demand for
having children. What used to be a large labor force in a developed country
will eventually retire with an expected long duration of life remaining,
the following cohorts of workers will decrease in quantity as the Total
Fertility Rates remain low, and the population will grow old. Many firms
in developed countries have a retirement age, which is usually above the
age 60, and it causes the elderly to retreat from the labor force. Some
elderly workers will keep working at alternative work places, but their
physical incapability due to aging will soon catch up with them. So then,
the elderly will no longer have a continuous flow of income as high as what
they previously earned as workers, and will need to rely on children's support,
pensions, old age work at a significantly lower wage, and savings. "Can
the elderly support themselves?" To answer this question it is necessary
to observe the general overview of the financial situation of older people
in the US, and Japan and Indonesia are also brought up as examples.
The U.S.
After World War II, the workers of the United States enjoyed security in
their employment and revenue, but this safe sentiment is now wearing out.
This threat has appeared because of firm downsizing trends due to "mergers,
business process reengineering, new forms of management, and advanced information
technologies to reduce the size of [firm's] workforces." (Koeber, 1)
Many workers are being displaced because of this shift in business trends,
and the proportion of older workers being displaced is substantially higher
than the proportion of laid off younger workers. Since older workers are
more experienced and have retained more wisdom and knowledge, it is logical
to conclude that they should be valuable human resources to a firm. However,
reality reveals that displacement of older workers economically benefits
employers. The salaries of older workers are generally more expensive to
a firm because of their expertise and they usually require more money to
maintain their lifestyle and family. To make matters worse, they are also
less often hired than younger workers and their span of unemployment tend
to be much longer. Age discriminating employers explain that younger workers
are much cheaper, are more exposed to modern education that is on the forefront
of trends, and are more apt to absorbing skills, technology compatibility,
and general know-how.
Another reason for the downsizing of various organizations is the emphasis
on "flexibility". During the 1980s, U.S. and European firms drastically
reduced their workforce by investing in technological and organizational
changes, focusing on the flexibility of their firm structures. This structural
renovation emerged from the economic crises of the 60s and 70s caused by
rigid labor structures and employment patterns. One kind of flexibility
is the internal flexibility that "matches the skills of workers to
changing task requirements of the workload, technologies and/or production
methods. Multskilling, broadbanding, collapsing job classifications, altering
or eliminating union work rules, and reengineering represent a few ways
that firms implement internal flexibility." (Koeber, 2) This allows
a firm to be more efficient and gets rid of idle time caused by workers
with narrow skills and jobs, and more work is accomplished with fewer workers.
The second type of flexibility is the external kind that reduces full-time
workers by relying on outsourcing. This method consists of firms utilizing
subcontracted and temporary assistance depending on their expertise needs.
For these reasons, the security of retaining a job erodes, and workers are
being displaced. As mentioned earlier, older workers are usually prevalent
victims because of their expense and inadaptability compared to younger
workers.
Another observed tendency in the displacement of older workers is that the
goods producing sector benefit more from the displacement of older workers
than in the service sector. Historically, the goods producing sector has
been more profitable than service providing firms because a larger profit
margin is "enabled by their greater economies of scale, market concentration,
asset concentration, higher capital to labor ratios, and price-setting ability."
(Koeber, 4 - emphasis added) Since greater profit margins allow higher wage
structures possible, workers are generally paid better in the goods sector.
Hence, older workers tend to be more expensive, and if they are laid off,
the capital to labor ratios (as emphasized in the quotation above) would
increase greatly, causing further profitability to firms in the goods producing
sector.
Japan
There are two types of labor management practices in Japan: the lifetime
employment system (LES) and the seniority-based wage system (SWS). The names
of these systems explain how they work, but basically, the LES is a system
where Japanese firms maintain their workers without laying them off or sending
them to other firms until they reach legal retirement age. The SWS is a
wage structure that is based solely on a worker's age, and that older workers
receive more benefits than younger workers.
The LES is made possible through the reliance and training of Tanoko, which
are workers with multiple skills and diverse expertise. These workers remain
in one firm and are occasionally transferred within the firm to operate
different tasks, and their flexible work experience and knowledge enables
them to successfully execute varying tasks. Another aspect of Tanoko is
that the workers tend to work in small groups to increase work efficiency,
and building up social capital. It is logical to think that these workers
with high expertise need to be intensely trained to reach such high status
of capabilities. Therefore, Japanese firms train these workers through the
Kogai system (in-house training). The Tanoko spend a large portion of their
lives in a single firm training and building experience; thus, develop loyalty
to the companies and the promise of a lifetime employment is secured even
further.
However, because of the recent increases in the population, workforce, older
workers, and retirement age; the number of Tanoko have increased tremendously.
Since they are older and more experienced, they tend to be expensive to
maintain for employers. Also, in the 1990s, Japan experienced a severe economic
bubble burst, causing the unemployment rate to surge. On top of that, technological
advancements have been gradually decreasing the need for workers. The combination
of such things has caused a tendency to displace older, experienced, and
expensive workers, similar to the case in the section above. Western influence
has caused Japanese firms to rely more on outsourcing, which also enables
a supply of highly trained workers. As a whole, the LES systems seems to
be decaying, but many professionals argue that official statistics show
no sign of this, and that the change in the labor management system is only
an adaptation of the LES to modern tendencies.
The SWS similarly is supported by the Tanoko and is nearing collapse. Since
the SWS promotes and offers benefits to older workers, the older Tanoko
enjoy abundant salaries and the younger workers earn less until they grow
older. At a glance it may seem non-egalitarian but the older workers went
through the same experiences as younger workers, and the young ones will
eventually grow to benefit from higher salaries as well. Not only is it
egalitarian, but workers sense security due to this steady inflow of currency
without having to worry about layoffs.
Again, this system is slowly disintegrating through the spread of work or
performance based wage system. The world is globalizing at a tremendous
rate and various Western methodologies have permeated into the Japanese
business structure with the appearances of Western firms in the nation.
So firms are deploying the SWS and adapting to the American performance
based system. In addition, more and more Japanese students are receiving
sophisticated education and training, and the performance gap between the
older Tanoko and fresh workers are narrowing. Recent younger workers are
unhappy and tend to complain about the seniority-based wage system because
of such narrowing. These factors are contributing to the depletion of the
SWS. The Japanese business society is moving slowly from being "survival
of the oldest" to "survival of the fittest". (Watanabe, 2000)
Indonesia
An interesting scenario could be observed in the elderly of Indonesia. Like
many countries, the elderly of Indonesia receive transfers from children
in order to live a decent old age life. One would assume that the higher
these transfers are the less a parent would be dependent on their income
from his/her job. Surprisingly, statistics show that there is no correlation
between the two. This lack of responsiveness of the elderly to financial
transfers will cause the workers to work until very old age levels. This
is supposedly because the value of transfers "is not large enough -
or may be too unpredictable - to play an important role in an elderly person's
labour-supply decision." (Cameron, 652)
Conclusion:
So then, can the elderly support themselves? After observing the examples
of different countries above, it is obvious that older workers are not being
valued as highly as they used to, and displacement is taking place at a
higher rate. Just for the sake of sustenance, it is possible for the older
generation to survive because of pension systems, their savings, and the
compassion of children or the younger generation. If they desire to live
a luxurious life though, a mixture of several things must be done. The elderly
will need to make an effort to maintain their jobs and work beyond retirement
age while not harming their bodies, they must save while they do so, ask
for support from children, and receive adequate pension benefits. The society
as a whole (the government and individuals) must work together to improve
life quality of the elderly now that population aging is becoming a serious
trend.
Koeber, Charles; Wright, David W. (2001), "W/age Bias in Worker Displacement: How Industrial Structure Shapes the Job Loss and Earnings Decline of Older American Workers", Journal of Socio-Economics v30, n4 (2001): 343-352
Watanabe, Susumu (2000), "The Japan Model and the Future of Employment and Wage Systems", International Labour Review v139, n3 (2000): 307-333
Cameron, Lisa A.; Cobb-Clark, Deborah A. (2002), "Old-Age Labour Supply in the Developing World", Applied Economics Letters v9, n10 (August 2002): 649-652