In order to extend the working life of employees, the systems of reemployment and employment prolonging have been in practice. It should be stressed, however, that these plans often provide greater flexibility to the management than uniform increases in the retirement age, because these programs are applied only to selected employees of a company (Furuya and Martin, 1981; Clark and Ogawa, 1996, 1997). In 1997, 70 percent of all companies with 30 or more employees practiced one or both of these systems. Of these companies, 54 percent reemployed workers after their retirement, 29 percent had a system for prolonging employment beyond the age limit for some employees, and the remaining 17 percent utilized both plans. The recent trends show that the proportion of companies using both plans has been continuously rising. It should also be noted that under these plans, workers' job responsibilities, wages and work statuses are lowered; this is particularly pronounced under the reemployment plan. Attention should be drawn, however, to the fact that the proportion of large enterprises with 5,000 employees or more having these plans is surprisingly low; in 1997, it was only 49 percent. This is because these large-scale businesses have an alternative arrangement; a substantial number of older employees are transferred to their subsidiary companies well in advance of their retirement age (Furuya and Clark, 1993; Ogawa and Clark, 1993; Clark and Ogawa, 1996, 1997).
Evolution of the Social Security System
Over the past few decades, the provision of income and other security for elderly persons through the social security system has improved to a pronounced degree. During 1970-1994, the total amount of social security benefits paid out increased by more than 18 times in nominal terms (Social Insurance Agency, 1998). In 1970, these social security benefits corresponded to 5.8 percent of national income, but grew to 17.1 percent in 1995, as shown in Figure 3. By international standards, however, Japan's current social security expenditure is considered to be at a relatively low level (Martin, 1989; Ogawa and Retherford, 1997).
In response to the increase in the benefits paid out, the ratio of social security contributions to national income also went up considerably over the same period. The growing difference between benefits and contributions has been covered primarily by resources from government general revenues. It should be noted, however, that faced with slower economic growth triggered by the two major oil shocks in the 1970s and fast population aging, the Japanese government, like the governments of other industrialized countries, has recently been making a series of modifications of various social security programs to increase revenues and limit expenditures (Social Insurance Agency, 1998).
