Japan labor market set for change as huge worker shortage looms
TOKYO (Kyodo) -- Japan's labor market may be at an inflection point as the nation braces for a shortfall of millions of workers, the rise of generative AI and risks to economic security.
The spotlight is increasingly on the sustainability of wage growth, which has been accelerating at the fastest pace in three decades. Prime Minister Fumio Kishida now wants to see pay hikes that will be "several percentage points higher" than the country's inflation rate.
Ideas:
Japan has seen this coming for decades with it low birth rate and younger people no longer willing to do the same work at their parents did.
Then add in the 4th digital revolution and and now generative AI, not just Japan, but most advanced countries are facing the same economic and society challenges.
An increase in wages will certainly help but it won't solve Japans apparent labor shortage. What Japan needs, which will not accept at this time, is more foreign workers into Japan.
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Japan's widespread seniority-based employment system, low labor productivity, and workers' reluctance to hop from one job to another have been among the factors behind its tepid wage growth for years.
In the short term, labor shortages are evident in the pandemic-hit services sector, with labor-intensive areas like nursing care and construction already struggling.
Ideas:
Japan's seniority-based employment system, which worked well in the past decades, might not be out of touch with what is needed now in Japan.
Even the later Peter Drucker, the management writer, who was/is highly regarded in Japan, said Japan is now too slow to change, and what worked many years ago, is not working now.
Low productivity is hard to measure as to what really is low productivity, for example for each country and each sector.
If Japan has a more flexible work system, maybe there would be more job hopping or changing of jobs in Japan.
If more workers were able and willing to change jobs, maybe companies would notice and pay higher wages to keep their best workers.
Again, part of the problem is the mindset of younger workers today who don't want to do some type of jobs.
And maybe rightly so, as services sector type jobs only pay minimum wage or not much more than that compared to what large company jobs pay.
Nursing and construction and not very glamours type jobs and young people don't want to the these days.
Article:
A potential crisis looms over the logistics industry as the planned imposition of a stricter legal cap on overtime hours, as part of labor market reforms, is raising concerns about an acute driver shortage.
Private-sector surveys point to more severe labor shortages for decades to come, with one of them estimating a shortfall of over 11 million workers by 2040. The nation had around 67 million workers as of July.
Ideas:
The logistics industry might be unwilling to pay what workers should be paid and as result they might have a shortage of workers. For example, unfortunately, even US amazon doesn't pay its workers enough.
Japan used to be a country that valued workers as stakeholders in a company but those days are long gone, as maybe Japan companies have become too westernized it how it runs its companies these days.
Even the US, for example it new report said it needs up to 3 million more legal immigrants each year to overcome its low birthrate.
And Japan, is in the same situation or worse but Japan hasn't taken any steps to really increase foreign workers into the country.
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The government is getting more serious about reforming the labor market, underscoring the need for reskilling the workforce, shifting away from seniority-based employment and boosting labor mobility as Kishida eyes setting in motion a positive cycle of economic growth and wealth redistribution.
"If more people move from one company to another, more companies will offer higher pay to get young, skilled workers," said Takuya Hoshino, a senior economist at Dai-ichi Life Research Institute.
Ideas:
Again, this is nothing new as its been happening for decades but now its become a serious economic problem.
Labor reform affects peoples lives and the Japanese government might have been reluctant to do anything might affect society.
sThe seniority-based system worked well for decades but maybe it been out of date for the past two or three decades as younger workers want a better labor market system.
If more Japanese worker were willing to change jobs then maybe companies would take notice and actually pay better wages to keep workers or get new workers.
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"The government wants reskilling programs to facilitate more job-hopping but there's another side to it as well. There are also companies offering such opportunities to their own workers, especially younger ones who want to brush up their skills, fearing they will lose such workers to other firms," he added.
Over the past decade or so, Japan has seen more women and elderly people join the workforce. It has opened its doors to more foreign workers, albeit slowly, but experts question whether Japan can compete with other nations where workers can get higher pay.
Ideas:
Upgrading ones job skills are good and needed but how long is it going to take the get workers to upgrade their jobs skills.
Companies should not fear losing workers and if they paid good enough wages and had good work/life benefits new workers would be more than willing to join their company.
Working women, might be the key to improved economic growth and improved labor productivity in Japan and women, especially at the higher positions are low in number.
And older workers are a key resource in any economy as they have many skills that younger workers don't have and maybe will never have.
If older workers are healthy and can do the job, let them work for as long as they want.
But Japan, like many countries, don't value older workers who want to do work and can do the job.
Higher pay, for foreigner or Japanese is important and all workers should be able and need to the highest pay possible.
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While some sectors have been reaping the benefits of automation and AI, and companies have plans to ramp up their investment in these fields, uncertainty remains over the long-term impact on the labor market.
As an effort to protect national security, Japan is also aiming to revitalize the once-competitive chip sector with the help of giants like Taiwan Semiconductor Manufacturing Co., to prevent a repeat of supply disruptions caused by the COVID-19 pandemic and China's increasing clout.
Ideas:
AI is both a positive and negative these days and many workers might be worried about losing their jobs to AI.
But there is always uncertainty as how to protect workers and at the same time transition to more AI in a company.
Japan seems to have lost competitiveness to China and especially South Korea related to the chip sector.
Fortunately, Japan has good international relations with Taiwan and Taiwanese companies work closely with Japanese companies in the chip sector market.
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The number of professional engineers would have to increase sharply for Japan to double its market share in the sector to 15 percent in 2035, according to an estimate by Mitsubishi Research Institute.
The institute estimates 9.7 million jobs will be lost by 2035 due to the effects of digitalization, including AI. But labor will still be in short supply that year as a result of a push for green and digital transformations and efforts to boost the nation's semiconductor industry.
Ideas:
One country or area that Japan should target for engineers is Taiwan and any country in Asia to increase the number of engineers it needs in the future.
Of course getting more young women into the science and technical fields is important too to increase the number or worker in the future.
But many advanced economies are facing the same challenges as maybe there aren't enough younger people going into the science or tech fields at universities
But many of these jobs maybe doesn't need a community college degree these days and many technical collages are providing the needed training .
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One challenge for the broader Japanese labor market is that the percentage of workers with non-routine, or "creative," tasks in relation to routine ones is lower than in countries like the United States and Britain, the institute said, expecting a severe labor shortage for professional technical occupations.
"It's important to think about how we can achieve a transition and see more people engaged in non-routine tasks" through reskilling or upskilling, said Masashi Santo, chief of human resource research at Mitsubishi Research Institute, adding that companies should more clearly specify what types of skills are required.
Ideas:
The needs of companies today and what society provides is big mismatch and maybe many universities haven't kept up with what companies need and maybe companies haven't communicated to companies what they need from college graduates in the future.
Unfortunately, universities are slow to change and some companies even slower as it might take money to change.
But not all workers want to change or need to change but at the same, economies need enough workers to retrain from routine mundane jobs to creative jobs.
Again, it might take a university degree but something like in Japan a two year college degree or certificate/license might be enough.
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More skilled workers can boost Japan's labor productivity and will be positive for the economy, economists say. Its labor productivity was the lowest among the Group of Seven advanced economies in 2021.
For now, accelerating inflation driven by higher import costs has been prodding companies to hike wages, while AI may reduce human workloads, boost efficiency and cut labor costs.
Ideas:
If AI is done correctly it should enhance what workers can do for a company and not should be been as a threat to job security.
But companies have to communicate correctly to their employees that AI will help and enhance the work experience not lesson their jobs or cause them to lose their jobs.
Again, maybe Japanese companies, especially traditional companies, have been slow to change or transition into more AI as maybe it takes time do do it.
Increasing wages is good but what good are wage increases if a worker thinks or know they aare going to lose their job in the future due to AI or other technologies.
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The International Labor Organization says generative AI, which is neither inherently good nor bad, will "augment" rather than destroy jobs. The U.N. agency is calling for governments and others to design the right policies to ensure a smooth transition because costs to affected workers will be "brutal."
"Japan is moving in the right direction in that it is moving away from its unique seniority-based employment and promoting reskilling programs. But there are limits to what government policy can do. The onus is on companies and workers," said Hoshino of Dai-ichi Life.
Ideas:
Not all companies are the same and maybe each companies has different AI needs and as such each company must decide what is best for them and their workers.
There is a need to move quick enough to improve productivity in the workplace but at the same time companies need to be sure workers are protected at the same time.
Government policy can only do so much as its up to companies and society to do their part in the transition period, where more workers in a economy become creative workers.
But the same time, all economies still need a certain number of routines type jobs and workers in the those jobs shouldn't be taken for granted or forgotten.
Have a nice day and be safe!
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