Photo/IllutrationPrime Minister Shinzo Abe, second from right, speaks at a meeting to discuss the new retirement age system on May 15 at the prime minister’s office. (Takeshi Iwashita)

Companies will be obliged to allow employees to work up to the age of 70 under a new government policy to solve a chronic labor shortage and stabilize social security revenues.

“We will aim to revise the law to secure employment opportunities up until the age 70 so that active and motivated elderly people can make full use of their experience and wisdom,” Prime Minister Shinzo Abe said May 15 at a panel on future investment set up under the prime minister's office.

Under the current system, companies are required to provide any of the following three options to employees who reach the retirement age of 60 and want to continue working: Abolish the age limit, extend the employee’s retirement age to 65 or introduce some form of post-retirement employment.

According to the outline of the new policy proposal that the government presented at the meeting, companies will be required to make efforts to ensure that employees can work until the age 70.

In addition to the three existing options, companies will be required to choose any of the following proposals: Arrange for the employee to land a job at a different company; provide funding so the employee can work on a freelance basis; support the employee in his or her efforts to establish a small business; and provide funding so the employee can work for a nonprofit organization or engage in similar social activity.

Companies will be allowed to decide which options to implement after labor-management consultations and let employees choose an option.

The new policy will be presented to companies as a moral obligation without any penalty if they ignore it.

But the government made clear it will consider making it compulsory in the future.

At the same time, the qualifying age to receive pension benefits will remain unchanged but the start of receiving payments can be delayed upon request.

With the population rapidly dwindling and aging, the government is confronted by the need to address the worker shortage and stabilize revenues for social security.

The government envisages solving the crisis by creating an environment that encourages more people to continue working after the age of 65 and up until at least 70.

It also hopes to ease corporate concerns about soaring labor costs associated with the new retirement age system by offering multiple options.

The proposed new retirement age policy will be included in an action plan for growth strategy that the government will hammer out this summer.

The Ministry of Health, Labor and Welfare will be involved in finalizing the wording of the policy document so the government can propose a revision to the Stabilization of Employment of Older Persons Law in the ordinary Diet session next year.

“The health condition of each senior citizen varies among individuals as does their drive to continue working," a labor ministry official noted. "The new policy will offer a wide range of options for them to choose."