Five years ago, when the general manager of Muji Taiwan suggested hiring older workers to fill manpower gaps, the manager of the company’s Human Resources and General Affairs Department, Cynthia Lin (林欣韻), was skeptical, wondering “is that really feasible?”

The skepticism was justified, given that of Taiwan Muji’s 1,100 employees at the time, only seven were above the age of 45.  

Lin’s doubts dissipated, however, after she spent some time observing the operations of the parent company in Japan, where she found the older workers at Muji’s retail outlets to be competent and energetic.

“I later found out that there were days when those employees only worked 2-3 hours. The company adjusted their hours based on the situation at hand,” she said.

In fact, middle-aged and elderly employees have emerged as a hidden pillar of Japanese service businesses. 

And the phenomenon is not exclusive to Japan. Labor market changes have been seen in several developed countries, as more suitable workplaces are created and individuals are allowed to put off retirement. As a result, older workers have been able to continue to play productive roles, helping mature economies overcome the challenges of aging populations.

Only Taiwan is going in the other direction, and has set itself apart from other countries as the “early retirement island.” 

Shortfall of 1 million workers

In 2021, the labor participation rate of people aged 55-64 was 79.1 percent in Japan, compared to only 49.2 percent in Taiwan.

Thus, more than half of Taiwan’s older workers have dropped out of the labor market and retired before the statutory retirement age of 65. If its labor participation rate in the 55-64 age group was the same as Japan, it would add another 1 million workers to the country’s workforce, which is currently dependent on hundreds of thousands of overseas workers to fill manpower gaps in certain sectors of the economy.

“There are many uncertainties involved with cross-border workers. Taiwan should instead [address its manpower issues] by first improving the labor participation rate of middle-aged and older workers, which is one of the lowest in the world,” said Minister without Portfolio Lin Wan-I (林萬億), who has long studied population policies.

Lower labor participation rate than Europe

Taiwan’s early retirement problem could send it into a Greece-like crisis. The early retirement of civil servants and workers, which sent pension obligations soaring, were a major factor in Greece’s debt crisis that exploded in 2009 and continued through much of the 2010s.

If benchmarked against OECD countries, Taiwan’s labor participation rate for older workers would be the fifth lowest, beating out only Luxembourg, Romania, South Africa and Turkey, but still higher than Greece’s 54.4 percent.

At the same time, the participation of older workers in the workforces of France, the Netherlands, and Italy has risen considerably over the past two decades, in sharp contrast to the trend in Taiwan.

Hao Feng-ming (郝鳳鳴), vice president of National Chung Cheng University, said the rapid improvement seen in European countries has helped ease shortages of workers created by their aging populations. 

Taiwan stands as one of the most rapidly aging countries in the world, yet has done little to prepare for the consequences, raising the potential alarm for government finances, health insurance and medical care, and even social stability.

Those concerns are only magnified by data showing that those who leave the workforce early are not necessarily well off.

Low pension thresholds encourage early retirement

Taiwan’s labor insurance pension system offers retirees two options: a one-time lump sum payment or a monthly annuity. In 2018, people could begin collecting the monthly pension at age 61, but the rules were amended, raising the retirement age by one year every two years until it reaches 65 in 2026. People are allowed to start receiving monthly benefits up to five years prior to the retirement age, but at a discount. 

The result of the system has been early retirement. In 2021 when the minimum age was 62, the average age of people actually collecting a monthly pension was 61.2 years old, with 28 percent of recipients yet to reach 60.

According to its latest report, the Labor Insurance Fund had hidden liabilities of over NT$10 trillion as of the end of 2020, and if the government does not provide funds from the general budget to prop up the program, it will likely go bankrupt in 2028. The more workers tend to retire early, the worse off the fund’s finances will be.

A key culprit in the country’s plummeting labor participation rate after people turn 55 is the Labor Standards Act.

The law sets the statutory retirement age at 65, but it allows workers to apply for voluntary retirement after working for more than 25 years, or when they attain the age of 55 and have worked for 15 years. 

This system’s extremely low age thresholds for retiring voluntarily and collecting retirement pensions fly in the face of international trends.     

In Germany, where the retirement age is 66, only people who have worked 35 years can retire early and collect a discounted pension. In the United Kingdom and Japan, the statutory retirement ages are 66 and 65 years old, respectively, and pensions can only be collected once those ages are attained. The Japanese parliament has said it has not ruled out raising the age for collecting benefits to 70.

The adverse effects of early retirement in Taiwan will intensify as the number of people of working age dwindle and the number of people who have to be cared for mounts. 

According to National Development Council data, Taiwan’s working population (people aged 15-64) is shrinking by 150,000 people a year, and the demographic dividend (the higher economic growth associated with lower birth and death rates) will disappear in 2028. By 2060, there will be more dependents (senior citizens and children) than working-age people. 

To be fair, many early retirements in Taiwan are not voluntary but rather because they cannot find a job and are forced out of the workforce.

A Ministry of Health and Welfare survey found that 95 percent of older workers have struggled when searching for a job. For 72 percent of them, their biggest problem was “age restrictions,” which reflects the attitudes prevailing in local boardrooms.  

The former general manager of workforce solutions company ManpowerGroup Taiwan, Allen Ng (吳璧昇), observed that Taiwanese companies prefer to recruit younger talent, and when the economy turns bad or their finances get tight, they offer early retirement plans to employees over 50 years old to bolster their financial statements.

Yet, for many older workers, their desire for a job has less to do with money and more about emotional fulfillment. 

Last year, the 104 Job Bank asked 500 people over 50 why they were looking for work, and more than 65 percent answered “hoping for social participation and interaction” while only 19 percent answered “need to continue earning money.”

Taiwan’s government has tried to take action, enacting the “Middle-aged and Elderly Employment Promotion Act” in late 2019. But the new statute’s impact has been limited, admitted Tsai Meng-liang (蔡孟良), the director-general of the Ministry of Labor’s Workforce Development Agency.

More than laws, a social upheaval is needed to encourage the employment of older workers. Stereotypes associated with age need to be shattered, companies have to rethink workplaces, and a cross-generational consensus on a common good must be reached if a million older workers are to return to the labor market.

When ManpowerGroup’s Ng decided to quit his job to start a new business at the age of 49, his son in high school said to him: “Dad, aren’t you too old to be starting your own business?” The question indicated that Gen Z still harbors traditional stereotypes about age despite being a younger generation.

Removing negative labels

Max Wu (吳春城), who founded the anti-ageism foundation Strong Generation, said the average Taiwanese lives to be over 80 years old, and that the country’s 5 million seniors still have 20-30 years left in which they can be productive and have spending power while finding fulfillment.