Without tackling Japan’s labor mismatch, Abe’s GDP target is just a pipe dream

by and

In September, Prime Minister Shinzo Abe announced that the government’s economic goal is to boost gross domestic product to ¥600 trillion in 2020. Most members of the business community have called this target impossible, since it would require an annual growth rate of 3 percent, and the last time Japan achieved that figure was in 1991.

Japan would have to add ¥110 trillion to its economy to achieve the government’s target, and to do that Japan needs to add several million people to the workforce. Earlier this month a government panel of academics and business leaders recommended that the ruling Liberal Democratic Party accelerate the planned ¥18 yearly increase in the minimum wage. The conventional wisdom about raising wages is that it tends to reduce employment, though in the United States there have been recent examples that seem to contradict this economic truism. Some companies in Seattle, for instance, have already raised their hourly wage to $15 an hour ahead of a local law that sets that amount as the minimum wage for “large businesses” within the next four years, and unemployment has actually gone down, though some economists say it has nothing to do with pay.

In any event, there’s no way Japan can boost GDP without expanding its workforce. The good news is that there is a surplus of job openings compared to the number of job seekers. The bad news is that there is a mismatch between the positions available and the people who are looking for jobs. In many instances it has to do with training or experience. There are not enough people with the skills necessary to fill many of the empty positions. A bigger problem is that the available jobs are not the kind that the majority of job seekers want, because of either the nature of the work or the employment conditions.

An article in the Sept. 28 issue of Toyo Keizai explains that construction and social welfare are the fields that need workers the most. Building and public works projects started decreasing in number in the late ’90s, and as older workers retired, fewer new ones were hired and trained. Since the Great East Japan Earthquake of 2011, construction demand has increased, but there is a serious lack of skilled workers. The labor ministry estimates that at the moment the industry needs another 500,000, and since more than 20 percent of the current construction workforce is over 60, a decade from now the shortage will expand to 1 million unless more workers are added in the meantime.

In the social welfare field — nursing, caregiving, day care—the welfare ministry projects that 2.53 million people will be needed by 2025, and that at the current rate there will only be about 2.15 million. The main problem is low pay and the demands of the job, which combine to result in high turnover. Caregivers quit because they don’t think the remuneration is worth the hard work.

Besides, there are other jobs available. Another field suffering from a shortage of labor is delivery services. More than 100,000 drivers are needed nationwide, and courier companies target caregivers since many caregivers have to travel to patients’ homes and thus already have drivers licenses. These companies also know that caregivers tend to be frustrated with their work, and while they don’t necessarily pay them more, the work is relatively easier. In this situation, however, workers are simply being moved from one field to another. They aren’t adding to the total workforce, so the overall economy doesn’t benefit.

Another problem is so-called career blanks: workers who have skills but leave the job market for personal reasons and don’t return. The Labor Policy Research Center estimates there are something like 10 million career blanks in Japan. A fair portion are nurses who quit to get married and have children and decide not to return to work afterward. Another difficult demographic is men or women who quit their regular employment to care for elderly parents full-time, but because they tend to leave their jobs in middle age, their prospects for re-entering the job market are low.

In a Reuters survey of major Japanese companies, 76 percent supported the idea of “using foreign laborers,” but the government has consistently resisted the call to allow more immigrants into Japan to fill labor needs. Consequently, it will have to persuade more Japanese to enter the workforce, and the only demographics available in any large numbers are women, the elderly and disabled persons. Abe is now advocating a program that will help workers whose parents require extensive care so that these workers don’t have to quit their jobs but, more significantly, the government should encourage companies to hire and even retrain middle-aged and retired people who don’t work at the moment.

But it’s women who could make the biggest difference, especially in fields that require manual labor, like construction. The problem is mainly structural, despite the government’s claim that it is giving more women opportunities. Ever since equality in the workplace was guaranteed by law in 1985, women have been channeled into nonregular employment though revisions in the labor laws that satisfy corporate demand for cheaper workers. Right now, 70 percent of all nonregular employees in Japan are women.

On the one hand, many of these women are homemakers who only work part time and purposely limit their hours so that they don’t make more than ¥1.03 million a year. If they make above that amount, they no longer qualify as dependent exemptions for income tax purposes and will also lose their type 3 status, meaning they will have to start contributing to social security plans.

On the other hand, women who do want to work full time disproportionately prefer office work. According to the Mitsubishi UFJ Research Institute, there are 3.24 million women looking for regular employment and 1.22 million looking for part-time employment as ippan jimu (general office workers), but there are only openings for about a quarter of these women, which means 3.35 million won’t be able to secure their “desired” positions.

The trick is to somehow channel this huge labor potential into fields that are desperate for workers, but that will take a concerted effort on the part of government and industry to not only retrain these women and make pay and working conditions more attractive, but also to convince them that women can be just as effective as men in jobs that men have traditionally filled.

Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month. For related online content, see blog.japantimes.co.jp/yen-for-living.

  • Richard Solomon

    Seems clear that PM Abe needs to do more than encourage corporate Japan to hire more women; to reduce the use of nonregular, temporary employment; to allow workers to care for aging parents; etc. He needs to restructure the tax systems to incentivize companies to make these changes. Eg, allow them reduced tax rates only if they hire more permanent employees and/or boost wages enough to give people more disposable income. Change the exemptions for married women working. Build more daycare centers and pay these workers enough so they will stay at these jobs.

    It’s time for Abe to do more than just talk about these things. He needs to get down to work and I plement significant changes in the system. Corporate Japan will complain. Will he stand up to his supporters and make these changes anyway because he knows these are needed? Or will he continue with his big talk and little action on domestic issues while pursuing his dreams of a ‘beautiful Japan,’ revising history, and collective self defense?

    • Ron Lane

      Richard, you’ve posted variations of the above half a dozen times. And whereas I agree completely, at this point it may be helpful to speculate just why he has thus far refused to use the tax system to force companies to change. As you say, companies will complain but won’t abandon their support for the LDP as they’ve got nowhere else to go.

      IMHO Abe continues to shoot himself in the foot with offers to reduce the corporate tax rate, as he did yet again last week. Why raise salaries and reduce the numbers of non-regular staff, etc., when the government plans on cutting your taxes without your having to do so? Corporations aren’t run by stupid people, but I’m not so sure that Abe’s aware of that.

    • Casper Cito

      But that won’t likely add much to the labor force. Corporate Japan isn’t a field that is or ever will be suffering for employee shortages. The Japanese mindset is such that these positions will always be considered lucrative and thus easily filled. The problem are the vacancies for jobs that are considered much less desirable.

  • Webber Depor

    someone explain me why japan does not accept unskilled labor. Dont you like syrians? Just go to russia and get them. you need them japan.

    • Stewart Dorward

      Plenty of local Asians we could use.

    • JoyBoots

      Japan has enough people to do the jobs, they just refuse to accept those jobs. This is wrong.

  • Liars N. Fools

    Abe Shinzo tends to look at the macro and his slogans. He is not good at the micro and details. Typical Japanese LDP plutocratic leader.

  • disqus_vBekJrf7g5

    Abe doesn’t have to bother himself with ‘details’ and ‘facts’! Pesky things!
    The masses WANT slogans and grand goals! Reality is such a come down for them- no thank you please!

  • disqus_vBekJrf7g5

    Abe doesn’t have to bother himself with ‘details’ and ‘facts’! Pesky things!
    The masses WANT slogans and grand goals! Reality is such a come down for them- no thank you please!

  • skillet

    I think there is a potential bright spot for Japan. Robotics. Robots will bring instability to most countries because of the surplus immigrants being used as labor. However, in Japan, where there are not enough people, the robots can be introduced without having masses of angry, disruptive people out of work.

    So Abenomics may not work this year. But at least, you will not have ISIS running around shooting people on the streets.

    • disqus_vBekJrf7g5

      Robots are a fallacy since they don’t pay tax, don’t make babies, and don’t buy houses, cars and TVs, which is what Japan needs.

    • Erren Yeager

      Did you just suggest immigrants = isis? Way to go.

  • Casper Cito

    You know what would help alot? If the all of corporate Japan was required to have onsite day cares that employed the elderly. This would take away from many women’s needs to stay home to take care of both the elderly as well as their children.

  • Casper Cito

    You know what would help alot? If the all of corporate Japan was required to have onsite day cares that employed the elderly. This would take away from many women’s needs to stay home to take care of both the elderly as well as their children.