Hollowing-out hurting factory ranks

Kyodo

The nation’s once-thriving manufacturing sector saw its total workforce fall below 10 million for the first time in 51 years in December — down sharply from an October 1992 peak, when it employed just over 16 million, government data has shown.

With 9.98 million workers, manufacturers remain a major employer by type of industry, behind only wholesalers and retailers, which hired 10.35 million of the country’s entire working population of 62.28 million.

But they are relocating factories from Japan — with its graying and declining population — to other parts of Asia in an effort to seek still-growing markets and lower operating costs. Elsewhere, some factories are shutting down, with operators being forced to pare jobs as part of restructuring efforts.

Factory closures have left workers — many hoping to continue in the manufacturing sector — struggling to find new jobs while their unemployment benefits last.

Kunihiko Maekawa, 37, is one of them.

Maekawa processed mechanical parts at a factory in Suita, Osaka Prefecture, operated by a Panasonic Corp. subsidiary until the end of August, when he was dismissed.

The company was forced to shutter its business after taking losses for three consecutive years from fiscal 2007, due chiefly to a slump in sales of compressors, the firm’s mainline product, typically used in air conditioners.

“I do not want to waste my skills,” said Maekawa, who has continued to search for a job in the sector. His unemployment benefits are scheduled to expire in April, but there are few manufacturing openings with attractive conditions, he said.

There are jobs in the food service industry and in the nursing care sector, Maekawa said. But he feels uneasy about those.

“Even if I switch industries, there is no guarantee that I will get a big enough salary to live on,” he said.

Michihiro Yamada, a former union chief at the Panasonic subsidiary, said many of his coworkers had built their homes near the one-time factory.

“If they take up jobs away from their families, that would create an extra layer of burden in their lives,” he said.

Of the 53 former union members, only 23 have so far been able to find new jobs. While some found work in the manufacturing sector, others ended up quitting because of unsatisfactory working conditions or felt they could not make full use of their skills in the new positions.

In the Kansai region, even top manufacturers like Panasonic and Sharp Corp. have seen their earnings slump severely.

Almost five months since the Panasonic subsidiary factory’s closure, former union members are forced to make hard choices: work for a faraway manufacturer or a different local industry.

With the yen’s recent depreciation, which makes Japanese goods more competitive abroad, and surging stock prices following the December election of Prime Minister Shinzo Abe, some are hopeful about a revival of domestic exporters, including automakers.

But structural factors afflicting the economy — including the high cost of labor, the limited power supply since the Fukushima nuclear crisis started, and delays in trade liberalization talks — have clouded this outlook.

The domestic market is also losing luster due to the shrinking and aging population.

“The yen is just getting back to an appropriate level rather than being depreciated. It will not go so as far as to halt the hollowing out (of industries in Japan),” a senior executive at a major electronics maker said. “Other countries are attractive as a market as well,” the executive added, suggesting his firm is in no way intent on not relocating overseas.

But Takahiro Fujimoto, a graduate school professor at the University of Tokyo, said domestic manufacturers have survived by boosting productivity and are still in a strong position.

“Labor costs are rising in China and other Asian countries, so quality manufacturers with high productivity can survive even staying domestically,” said Fujimoto, who serves as the head of the university’s Manufacturing Management Research Center.

In contrast, Recruit Works Institute’s Yukio Okubo is less optimistic about job prospects in manufacturing industries.

It would be difficult to “reverse the (declining) number of employees in the manufacturing sector,” he said.

Industry watchers say that even if manufacturers see their bottom lines recover, that would not lead to an increase in jobs here as they would likely make new investments overseas.

“We need to be realistic and seriously discuss shifting workforces into the service sector,” Okubo said. He said vocational training should shift focus from manufacturing skills to elderly care and other service industries.