Commentary / Japan

The need for a skill-based approach to jobs

by Yoko Ishikura

At the initiative of its chairman, Hiroaki Nakanishi, Keidanren (the Japan Business Federation) has reached a formal decision to abolish the uniform recruiting schedule for new hires among its member companies. I welcome the decision as a move to shake up conventional labor management and human capital development practices in Japan — which I have always found too rigid, and increasingly outdated, amid the debate and discussion over the future of work in the global landscape.

Maintaining a “traditional” and “orderly” once-a-year recruiting practice in Japan, which is quite different from the trend elsewhere, has limited the nation’s potential to address its declining working-age (15 to 64) population and the opportunities for Japanese businesses to broadly recruit the best talent from the global pool.

The fast-changing technologies of the Fourth Industrial Revolution have disrupted industries and companies. As the importance of human capital as a critical resource for companies (and for the country) has become clearer, it is about time for their hiring practices and human resources management to change.

In fact, “future of work” is one of the most debated topics today, as robotics and artificial intelligence have been introduced and applied to work. Though there are both positive views emphasizing new job opportunities made possible by new technologies and negative views focusing on job losses due to automation, AI and robotics, the World Economic Forum’s Future of Jobs Report 2018 concludes that there will be a net positive outlook for jobs over the period until 2022. In Japan, the pessimistic view of technology negatively affecting the job landscape of the future seems strong, although at the same time application of the new technology is perceived as a positive force by alleviating the impact of the shrinking pool of people in the productive age bracket.

I would like to shed some light on the future of work in Japan in the global context, since I recently participated in a workshop in New York on the topic. The conference was titled “Building inclusive and dynamic economies in the Fourth Industrial Revolution” and organized by the Center for the New Economy and Society of the World Economic Forum. I have been involved with the forum’s activities for the past decade, serving as a member of Global Agenda and Global Future Councils on the topic of “skills, talent mobility, education and the future of jobs.”

At the two-day workshop with private sector companies and institutions, the participants addressed several issues, including the industry-specific outlook for the future of jobs (emerging jobs such as data analysts/scientists, AI and machine learning experts, and declining jobs such as data entry clerks, administrative and executive assistants) and skills as new currency for the labor market.

We discussed the future of work for four specific industries — consumer; aerospace; aviation; travel and tourism; and financial services — to explore whether and how we could design industrywide and cross-industry collaboration. Our discussion covered whether and how skills are increasingly used to assess people for jobs in place of a university degree or vocational certification. We also discussed broader issues such as rethinking economic value and welfare, job creation strategy for the Fourth Industrial Revolution, alternative business models for the platform economy and rethinking the social safety net.

The topic that I found most relevant for Japan’s labor management debate was skill-based hiring. A skill-based approach to filling jobs is not well-developed in Japan, where degrees from good universities and career resumes as well as interviews are used as the main screening criteria.

Because hiring by Japanese companies is expected to become more flexible in terms of timing and practices with Keidanren’s latest decision, the definition of skills required for each job position and their application to hiring becomes urgent. In addition to employers who have to develop new plans for hiring, individuals need to review whether the degree-based hiring that has been dominant in this country will continue and that a degree from a “top” university will guarantee a job for life.

In fact, I find an increasing concern among young people when I show them a list of the “growing skills” that they will increasingly need to develop (for example, analytical thinking and innovation, creativity, originality, initiative, and technology design and programming) at seminars and workshops that I recently hosted. They are very interested in exploring new approaches to skill development, since they realize that current university degree programs do not provide efficient and effective way to develop the aforementioned skills.

Another topic I found relevant to Japan is the job creation strategies for high potential sectors with many new emerging jobs. These sectors include education and health care, for example. We discussed the need to extend the concept of “job” to task-based and contract work such as freelancing. We also identified a new role for the government to intervene to ensure some kind of standard to prevent exploitation of people engaged in that kind of platform work, together with a new approach to the safety net for such workers.

Capping the overtime hours of full-time company employees has been an issue for some time under the Abe administration’s work-style reforms. But the concept of “job” defined as “full-time work at companies” is still deep-rooted in Japan, where the proportion of freelancers and contract workers in the workforce remains smaller than in other developed economies. There should be a detailed review of the potential and challenges of task-based and contract-based work in this country, since the expanded definition of jobs will enable more women and senior citizens to participate in the labor market.

An overview of the labor management landscape in Japan and comparison with the rest of the world need not lead to a pessimistic conclusion that Japan is so much behind the current and emerging human capital management trend worldwide. On the contrary, it can trigger a more positive and optimistic view that Japan is a good candidate for pilot projects and experimenting with a variety of new practices now discussed around the world. They include a skills-based approach to hiring, promotion and performance evaluation, and feasibility of alternative work styles such as task-based and contract work — by capitalizing on the nation’s declining pool of productive-age population and the need to engage more women and elderly people.

Japan has maintained its traditional and outdated model of human capital practices for a long time, and as such does not have a good base and/or vehicle to develop growing skills and flexible work styles. But having little experience suggests that Japan — both its private and public sectors — can start from scratch to collaborate to build a new labor management model.

Yoko Ishikura is a professor emeritus of Hitotsubashi University and serves as an independent consultant in the area of global strategy, competitiveness and global talent. She is a member of the World Economic Forum’s Global Future Council.

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