In spite of these pronounced changes in the labor market, the fundamentals of Japanese employment and wage practices have been changing slowly. The seniority wage system and the lifetime employment practice are still the two major institutional features particularly for male workers in large-scale businesses (Ogawa and Suits, 1983; Martin and Ogawa, 1988; Clark and Ogawa, 1992a, 1992b). Lifetime employment provides job stability to workers, who in turn exhibit a high level of loyalty to their employers. These extremely loyal workers are essential for team work which the Japanese system of industrial relations promotes.
Despite dedication to their work, they are required to retire at an age specified by the company. Japan's mandatory retirement policies probably represent an extreme among the practices of industrialized nations (Schulz, Takada, and Hoshino, 1989; Clark and Ogawa, 1997). It is important to observe that the proportion of firms having mandatory retirement has been increasing, not declining. In 1995, average retirement age for large-scale businesses was 60.0 years, markedly low in comparison to other highly industrialized countries and in view of Japanese life expectancy (Clark and Ogawa, 1992b; Ogawa and Clark, 1993).
One of the principal obstacles to raising the mandatory retirement age beyond 60 years old is related to the practice of the seniority wage system, under which the postponement of retirement age leads to larger wage bills. In response to the aging of the work force, however, many businesses, particularly among large-scale enterprises, have been gradually modifying the seniority-based wage system by introducing ability-related elements (Ogawa and Suits, 1983; Clark and Ogawa, 1992a, 1992b, 1996, 1997).
Although the wage system has been modified over time in response to the aging of the labor force, the traditional seniority remuneration system is still widely prevalent . Because of this age-graded wage system, younger workers are still strongly preferred to older workers. Hence, the employment opportunities for aged workers are still seriously limited. For example, the ratio of job openings to job seekers for the age group below 20 was 2.6 in 1997, as opposed to less than 0.1 for the age group 60-64.
Although employment opportunities for the elderly are severely limited, the labor force participation rate of older workers still remains at a much higher level, compared with that for other industrialized countries. Data displayed in Figure 2 illustrate this point. It should be emphasized, however , that the majority of elderly workers in Japan are either self-employed in the primary industry or employed by small-scale businesses with low pay, prestige and job stability (Ogawa and Clark, 1993; Clark and Ogawa, 1996, 1997).
