Whichever way you stack them, Japan’s demographics do not look pretty. Simply put: there are now more jobs than people, and the situation is set to become more acute as the workforce continues to shrink. Mass immigration does not appear to be on the political horizon, while an unlikely sudden spike in the birth rate would take two decades to filter through to the labour market. Even the apparent no-brainer of greater female workforce participation — touted as Womenomics — is progressing slowly. While many sectors are beginning to feel the squeeze, one industry that is benefiting is recruitment, with services more in demand than ever.
Approximately one million people are currently disappearing from Japan’s potential workforce every year, though that number will drop as the working-age population shrinks further. Having peaked at over 87 million in 1995, the workforce had fallen below 80 million in 2013, and is predicted to drop further, to 68 million, by 2030, then to 44 million by 2060.
Meanwhile, a plan floated by government advisers last spring to accept 200,000 immigrant workers annually was dead in the water before the summer had arrived, apparently killed by conservative opposition within the ruling Liberal Democratic Party. Just as that plan was dying, government figures were showing there were 1.1 jobs for every applicant. The lack of qualified workers is beginning to put a strain on some sectors of the economy and will begin to restrict growth if left unchecked, according to many observers.
“There are severe shortages in sectors such as construction, which is now causing a bottleneck for public works,” says Kentaro Koyama, economist at Deutsche Securities in Tokyo.
“The most recent GDP figures, which were revised downwards, were affected by a drop in public spending due to a shortage of construction workers,” says Koyama, who points out that the situation in Tokyo, in particular, is likely to become more severe in the coming years leading up to the 2020 Olympics.
However, the shortage is currently affecting only certain industries and not yet impacting the overall economy to a significant degree, suggests Koyama, who points to the medical sector as another that is feeling the strain.
Koyama predicts it may not be until 2017 before significant negative impact is seen on the economy from a lack of workers. He points out, though, that with the consumption tax rate due to rise again that year (from 8% to 10%), the accompanying slowdown is likely to relieve wage pressure.
Hays Recruitment Specialists provides an annual Global Skills Index, which includes a measure of the gap between available talent and labour-market requirements by country.
“The talent mismatch in Japan is 9.5 on a scale of 10, up from last year, and the highest anywhere in Asia–Pacific,” says Jonathan Sampson, country manager for Hays Japan. “If you can’t get the right people into the right jobs, it’s going to hamper Japan’s ability to recover.”
As well as boosting its own business, Hays Japan’s candidates with skills in human resources have become highly prized as companies put more focus on retaining existing staff, adds Sampson.
The Abenomics reform efforts of Prime Minister Shinzo Abe’s government also get a mixed report card from Sampson: “The rhetoric has been positive, but as for seeing action, that’s going to take longer.”
Despite talk of “sensible immigration policies”, Sampson reports that the time it takes to secure visas for candidates has doubled, from two-to-three weeks to four-to-six.
“Womenomics is one area of Abe’s policies where we’ve seen some positive impact,” he continues. “There has been encouraging talk about this; and things are being actioned, though there is still a lot of work to be done.”
Despite the talent squeeze, some companies are still unwilling to break with tradition and, for example, appoint an outside manager who may be younger than some of his or her subordinates, according to Sampson. That kind of inflexibility is also observed by Lanis Yarzab, managing director of Spring Professional Japan.
“There is a shortage [of workers] because of the ageing workforce, but a number of positions stay vacant due to legacy hiring systems,” explains Yarzab. “Many companies are willing to allow a position to stay open for nine months or longer, until they find the exact person they’re looking for.
Yet, as Yarzab also reports: “In many cases, I don’t see a large difference between the hiring processes of Japanese companies and the local practices of global firms.”
Meanwhile, she does see progress in terms of firms working to retain employees, particularly women re-joining the workforce. “I have met with companies that now offer training to expectant mothers and their managers so they feel encouraged to return to work,” Yarzab says. “I would like to see more open policies for being able to hire foreigners, and incentives to do so. The shortage is real. I don’t think we’re at the breaking point, but it is getting worse each year.”
And despite the growing globalisation of business, fewer Japanese people are studying English abroad, and scores on the TOEIC (Test of English for International Communication) are falling, she points out.
David Swan, managing director of Robert Walters Japan and Korea, also notes how the shortage of bilingual candidates in some sectors means there are two to four jobs for each applicant for certain positions.
The difficulty that companies are having in attracting qualified candidates, though, is proving a definite boon for the recruitment industry.
“The fact that this skills shortage affects most, if not all, companies — and that the need for bilingual and global abilities continues to increase — has also meant that, in recent years, we have been able to work with a much greater range of Japanese companies than we were able to in the earlier part of our 15-year tenure in Japan,” says Swan.© Japan Today