Seeing Japan's older workers made me wonder how the US could better prepare for an aging economy

• Japan has adapted to an aging workforce with government support and job programs.
• Nearly 30% of Japan's population is 65 or older, with many working in low-wage jobs.
• Experts say the US can learn from Japan's policies on older workers, as well as shortcomings.

While traversing the narrow, winding roads outside the Japanese town of Fujikawaguchiko, I stopped by a farm with a view of Mount Fuji, where a few locals were picking fruit. Most were older, and one was walking with a cane as she bent down to put berries into a bag.

At an udon shop, drivers and construction workers — some of whom looked to be in their 60s — were slurping noodles. The server said she knew people who have owned nearby restaurants and shops for decades.

After settling back at Shinjuku Station in Tokyo, I noticed that the older workers I had encountered in the city worked as crossing guards, cleaners, gift shop owners, taxi drivers, or wholesale workers. Only a handful of the older Tokyoites I observed were wearing the white-collar uniform of suits and ties.

When I visited Japan in early December, I had just finished the capstone story of my 80 Over 80 series, the most in-depth look at America's older workers that I know of in modern press or academia. In the months prior, I interviewed nearly 200 Americans working past 80 in dozens of professions. I discovered that nearly 550,000 Americans in this demographic work, according to Census data, and the number is expected to continue increasing as the US workforce ages and the cost of living rises. In interviews, dozens of American researchers said government benefits fall short for millions of older Americans each year, adding that the US could look to countries like Japan for inspiration.

Japan, like many of its neighbors, has experienced rapid aging over the last few decades. Nearly 30% of Japan's population is 65 and older, the highest of any country, according to government data. About one in four in this demographic works, meaning that about one in seven Japanese workers is 65 and older.

Comparatively, this demographic comprises about 18% of the US population, and roughly one in five works. The US has not aged as rapidly as East Asia, although increased longevity and lower birth rates have propelled aging enough that by 2030, the Census Bureau projects there will be more Americans 65 and older than under 18.

Japan has adapted in many ways to its hyper-aging population. Its government has actively supported older worker employment, especially among older women. Seven researchers studying aging workforces in Japan and South Korea told Business Insider that keeping older workers employed at higher levels has helped both countries mitigate economic disaster and severe labor shortages.

The Japanese case is much different from the US, though, some researchers said. While the US will continue to experience lower growth rates, the workforce is unlikely to decline as much due to aging, assuming that comparatively higher fertility rates and immigration levels hold steady or rise. The desire to hire younger people is often stronger in the US than in Japan, though the US also has a younger population. The US also lacks a comprehensive healthcare system like Japan's, with worse general health metrics.

Researchers agreed Japan still has a long way to go in supporting its aging workers and preparing mid-career workers for a stable retirement. For the US, Japan may offer a different glimpse into what an older workforce can look like.

Working longer with more protections

Japan is often the first country many think about when discussing aging. It boasts the world's highest number of centenarians per capita and advocates for active lifestyles, healthier diets, and reliable healthcare.

Many older Japanese people work in manufacturing and retail, with an increasing number in service roles, construction, and medical-related services. America's oldest workers also frequently worked in these professions, particularly construction and education, according to Business Insider's analysis of Census Bureau data.

Japan has mandated that companies provide more employment opportunities for workers aged 65 and above through its Act on Stabilization of Employment of Elderly Persons. Legislation has encouraged companies to offer work opportunities until the age of 70, while former Prime Minister Fumio Kishida committed one trillion yen over five years for reskilling efforts.

Japan also has Silver Human Resource Centers, which provide part-time work and skills training for older people, as well as the government's Lifetime Employment Support Office.

The World Economic Forum notes that 80% of Japanese workers hope to continue working in some capacity after retirement. Some companies have implemented policies that enable workers to extend their retirement age and offer promotions and salary increases beyond 60. Japan's Ministry of Health, Labour and Welfare provides employers with subsidies if they can convert older contract workers to permanent jobs.

Jacob Funk Kierkegaard, a nonresident senior fellow with the Peterson Institute for International Economics, argued in a paper from April that Japan has alleviated many potentially disastrous economic outcomes of hyper-aging. Kierkegaard told Business Insider that despite Japan's unique socioeconomic and aging circumstances, the country may be a model for its neighbors, as it raised female employment levels, expanded immigration pathways, and became more integrated with foreign economies.

"In many ways, the Japanese labor market was always much more receptive to the idea of employing workers at high ages because they tend to be healthy and motivated and do the type of service-sector jobs that you could do at a high age," Kierkegaard said.

Battling the effects of aging

Japan isn't without its challenges, though.

"Even if Japan has done better than any other country, it doesn't mean that older workers in Japan have the same labor force participation or earnings potential as does prime-age workers," Kierkegaard said.

Many older Japanese workers are employed in low-wage jobs, as many companies remain reluctant to hire older workers for higher-paid positions. Much like in the US, many Japanese companies assume older workers require more training and costs. Japan's hierarchical workplace structure also means it's often harder for an older worker to climb the ranks.

Population aging contributes to critical labor shortages, according to Haruki Seitani, an economist at the International Monetary Fund and coauthor of a working paper on aging and AI in Japan. His research found that as Japan's labor force ages, productivity growth at work falls.

Many older Japanese workers earn money out of necessity, said Yasuo Takao, a political scientist at Curtin University in Australia. Government survey data shows that over half of older Japanese workers were predominantly motivated by money, compared to under 16% who worked to feel fulfilled.

Japan has struggled to expand employment among its older population, he said. Many companies are incentivized to "retire" their older workers, then rehire them at lower pay, which Takao said discourages them from "remaining fully engaged."

"Japan's wage structure is harsh for older workers because it is built on an aging seniority system that inflates wages in mid-career and then resets them sharply at retirement age to control labour costs," Takao said.

Takao said that older Japanese work at rising rates because labor shortages sometimes force firms to retain workers. Each year, more people leave the workforce than enter, and the working-age population has declined by over 10 million since 1995. Projections put the labor shortage at upwards of 6.4 million by 2030, and many companies have opted to automate tasks or give employees more work instead of hiring older workers.

Pension reforms have also made work more imperative for some older workers. Japan has a two-tier mandatory public pension system that relies on contributions, which is "highly sensitive to population aging," Takao said.

Older Japanese workers tend to put in fewer hours compared to their younger peers, although this may be partly due to cuts in pension benefits that apply if they exceed a specific threshold.

"If Japan can transition from quantity-driven senior employment to quality-driven, skill-aligned senior employment, it stands to gain a powerful long-term demographic dividend: higher productivity, lower fiscal strain, stronger innovation capacity and a healthier, more engaged older population," Takao said. "In this sense, treating older workers as a source of economic strength, not a cost to be managed, may be one of Japan's most important growth strategies in the decades ahead."

What the US can learn

Japan's approach to managing its aging workforce — and its shortcomings — can offer some valuable insights into what the US can do.

Takao said the US can avoid the "Japan trap" of older workers needing to work by acting earlier to expand phased-retirement opportunities and protect older workers' earnings. Takao added that the US should invest earlier in training and job redesign so that older workers can secure jobs that match their skill sets.

About 40% of female Japanese workers of all ages hold part-time jobs, compared to about a quarter of US female workers, and this rate increases with age. The US can learn from this discrepancy by providing more assistance to women who want to hold steady employment during their parenting and caregiving years.

When it comes to AI, Japan may be a cautionary tale. Japan has a relatively low exposure to AI, as determined by usage rate, compared to the US and China. Seitani said that AI could help aging-related labor shortages in occupations like transportation services, construction, and clerical work. Long-term, this could mean older workers may be less pressured to stay on the job or may have more flexible hours.

Additionally, the research suggests limited mobility between jobs with high and low AI exposure among Japanese occupations. The US can do more to promote technological education for older workers to improve their work outcomes.

Kierkegaard said many countries may have to adjust their lower retirement ages and more robust safety nets as they age, so older residents aren't as reliant on the social safety net, which might crumble if the demand exceeds the available resources.

"Ultimately, Japan's experience shows that aging societies require more than labor-supply fixes. They demand a broader redesign of pensions, work norms, care systems and urban infrastructure," Takao said. "The United States still has time to adapt, but the window for proactive reform is narrowing."