Japan is facing the biggest skill shortages out of any country in the world today; according to Statista:“…81 percent of firms in Japan (with 10 or more employees) encounter difficulty finding qualified employees.”Let’s look at some of the reasons for this and what Japan is doing to counteract this damaging trend, as we discuss some important lessons other countries can learn from Japan’s skill shortages dilemma.
Aging Demographics
The biggest factor contributing to the labor shortages in Japan being higher than in other countries is its large aging population. According to Ministry of Internal Affairs and Communication, Statistics Bureau – “Japan Statistical Yearbook, Chapter 2: Population and Households:”
“The number of Japanese people aged 65 years or older nearly quadrupled in the last forty years, to 33 million in 2014, accounting for 26% of Japan’s population. In the same period, the number of children (aged 14 and younger) decreased from 24.3% of the population in 1975 to 12.8% in 2014.”
We learn more from an article found onNikkei Asian Reviewcalled:“Japan looks abroad, cautiously, for labor shortage solution”, written on September 27, 2016,
“Japan’s working-age population fell below 80 million people in 2013, and is now around 77 million. Fields such as nursing and construction are particularly hard hit, with job openings outnumbering applicants by more than three to one.”
The aging population was caused by sociological factors more than economical, which means countries need to pay attention to birth rates and demographic trends. Japan is now focusing on encouraging family planning with higher birth rates, yet the damage has already been done at the present time.
Skill Shortages Across all Industries
As the third largest economy in the world, Japan has many industries that need skilled labor to keep up with growth; yet, with a shrinking working-age population, 81 percent of firms are struggling to find qualified applicants.
Skill shortages are being felt across all industries because of this shrinking population; other factors contributing to the problem are: rapidly advancing technology, an emerging global economy, and stringent immigration policies.
Japanese companies are putting more emphasis on directly recruiting from higher educational institutions to fill the gaps for talent, yet industries hit the worst are the least productive. We learn more from an article found on The Japan Times called:“Labor shortage is worst in least productive industries”, which explains:
“Labor intensive sectors like hotels, restaurants and elderly care are suffering from the biggest labor shortage.
The problem is that these same industries – which have fewer opportunities than manufacturing for automation – top the list for the lowest productivity per worker.
That crimps their capacity to offer better wages.”
Japan’s Solutions
From the Nikkei Asian Review article quoted before, we learn:
“A Japanese government committee on labor issues will weigh allowing unskilled foreign workers in understaffed sectors such as construction and nursing care…a sure controversy in a country with notoriously tight employment restrictions.
…At present, most of Japan’s foreign workers either qualify as skilled labor or enter the country as interns learning technical skills.”
In order to solve the skill shortages, the Japanese government and companies are:
- focusing more on recruiting from higher educational institutions directly
- allowing more unskilled labor from other countries to enter their workforce
- encouraging higher birth rates among their population
- bringing women into the workforce more
- recruiting internationally for talent (especially: IT and management)
- improving wages and upward mobility
- using technology and automation to recruit talent and replace labor
Summary
Japan’s acute labor challenges and skill shortages can teach other countries, facing similar problems across the world, some important lessons. Population demographics and politics have a lot to do with skill shortages, as well as immigration policy and the sustainable growth of large economies. Other countries can also learn what steps to take to solve these huge issues.
Only time will tell how well Japan deals with their skill shortage issues, which is true for many countries in the world facing similar challenges, albeit less severe. Rapidly advancing technologies, an emerging global economy, labor automation, changing demographics, and a growing global mindset – are some of the many factors contributing to worldwide skill shortages.
Watching and learning from how Japan deals with these challenges will give other countries a strategic advantage in the future. No doubt, international recruitment efforts will play a large role in the overall solution.
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