Commentary / Japan

Flexible work style — can it be sustainable?

by Yoko Ishikura

The urgent need to improve the work style of Japanese people has been recognized and debated for some time. Behind the need are the rapidly declining working-age population (people age 15 to 64) and the nation’s persistently low productivity, just to name two contributing factors. These issues are complicated and interrelated, and no single solution will resolve them all.

The government has introduced several policy steps, such as capping overtime to reduce the chronically long work hours of company employees, so that more people such as the elderly, people with disabilities and women with small children can flexibly take part in the labor market. Initiatives by the Abe administration to empower women have been underway for some time, while, in an effort to make executive boards at Japanese firms more diverse, inclusive and transparent, corporate governance codes and women’s empowerment regulations call for greater diversity.

The administration has launched a campaign to enable elderly workers to continue working beyond age 65. It has also requested the private sector to allow employees to hold second or side jobs while retaining their status at their primary company.

The companies have in turn responded by reducing overtime and making efforts to increase the number of women in senior positions through training programs and by departing from the traditional rigid recruiting practices and promotion programs. But for side and second jobs, employers’ responses have so far been more mixed.

In this context, two figures recently released by the government caught my attention. One is 30 million, and the other is 3 million — each representing recent trends in the labor market and human resources practices.

The number of women with jobs topped 30 million in June for the first time on record, accounting for 44.5 percent of the total workforce. The ratio of women’s participation in the labor market is now higher than in such advanced economies as the United States and France, according to a survey by the Internal Affairs and Communications Ministry. Particularly striking was that the labor participation of women 65 or older has shown the fastest growth, even though the ratio of elderly women with jobs — 17.7 percent — is still about half the figure among men. The upward trend of elderly women in the workforce is encouraging as one of the solutions to the rapid aging of the population.

As for promoting more women in leadership positions, we still have a long way to go. According to the Japan Institute for Labor Policy and Training, the ratio of women in managerial positions was 12.9 percent in 2016, far lower than the 43.8 percent in the U.S. and 32.9 percent in France. Even fewer women occupied executive positions, accounting for a mere 3.7 percent of the seats on boards of directors at Japanese firms (compared with 17.9 percent in the U.S. and 23.2 percent in the United Kingdom).

One of the major obstacles for women to advance to leadership positions is the deeply ingrained perception that their major role in society is in the household. Such a mindset passed on from generation to generation is very difficult to change. But we may be able to shift gears, since we have more evidence that diverse boards and leadership at companies leads to better performance — and because businesses require fresh ideas in order to compete more effectively on the global stage.

Meanwhile, the Cabinet Office, in the first official estimate of its kind, put the number of people working as freelancers at somewhere between 3.06 million and 3.41 million, accounting for 3 to 5 percent of the total workforce, depending on how you define freelancers. The ratio of people who work freelance as their primary job — at a mere 3 percent — is less than half the 6.9 percent in the U.S.

Freelancing as an alternative way of work other than the traditional pursuit of a full-time job as a company employee apparently has yet to take off in Japan. Compared with other countries where the “gig economy” is making a big impact, the belief in a full-time job — preferably with one company through your career — is still quite strong in this country. However, policies encouraging corporate employees to take on second or side jobs are expected to lead more people to experiment with alternative styles of work, such as freelancing.

We also see a growing presence of co-working spaces such as WeWork for freelancers who do not have their own office. These facilities not only rent rooms but also provide space for people with similar interests and aspirations to share ideas and build a community. The increase of such co-working spaces in Tokyo indicates a growing interest among people to explore unconventional careers and work styles. They want to work on a project, rather than for a specific company, and thus require space to work and collaborate with others as needed.

A survey of freelancers by Lancers Inc., a major firm in the cloud-sourcing business, indicates that freelancers have a higher satisfaction level (53 percent) with their work style than others (20 percent), since they appreciate “freedom” as the No. 1 benefit. Concerns cited by people working as freelancers include the lack of stable income and absence of a safety net such as social security. Among would-be freelancers, the policy among employers of prohibiting second jobs is perceived as a key obstacle.

When the safety net is put in place by the government and side and second jobs are allowed by more companies, the probability of more people freelancing is expected to increase. Support infrastructure such as help from professionals (accountants, lawyers, etc.) could encourage more people with skills (such as the elderly, some women and people with disabilities) to work on projects for a certain period of time without committing to full-time work. They will help both companies and workers to make the best of their skills. Abe’s policy for “same pay for same work” could be incorporated into this effort of identifying and defining skills.

Just as these statistics were released, I had a chance to visit Fukuoka for a firsthand look at an effort to promote yet another way of work — launching a startup.

Japan is known for its small number of startups and its relatively negative view of them. Professor Noriyuki Takahashi of Musashi University, using Global Entrepreneur Monitor data, says the ratio of Japanese interested in startups is much lower than in the U.S. and China. The ratio has been declining.

The city of Fukuoka, under the leadership of Mayor Soichiro Takashima, who designated Fukuoka as the “startup city” in 2012, can serve as a model of an innovation hub. Fukuoka has established a startup visa program for attracting non-Japanese seeking to launch a business. Its designation in 2014 as a National Strategic Special Zone paved the way for tax cuts for startups in such areas as health care, agriculture and advanced IT. Due to these efforts, the city has been buzzing with people interested in launching a startup.

The city has a young population, with the highest ratio of population growth among 21 major cities across Japan. It has led other cities in the ratio of new businesses opening each year to the total (at 7.04 percent in 2016) three years in a row. Fukuoka Growth Next, Japan’s largest startup accelerator and supported by 22 well-known companies, was established in 2017. It is housed in a converted former elementary school, offering an attractive space for startups.

Fukuoka’s initiative, though successful, is still very young and needs more action to make it sustainable. For example, more effort is needed to communicate its vision and activities nationally as well as internationally (in particular Asia), to make the most of the city’s geographical location and potential to expand to Asia.

We see signs of what can drive a transformation of the way people work in Japan. What we need is to make these moves and developments sustainable, rather than a short-lived fad. The key to a sustainable impact is a new mindset and accompanying activities that recognize the following: The world is changing rapidly, and we cannot continue the same approach as before; and people’s work style and career needs are diverse and changing. There is no single right approach or one-size-fits-all solution to accommodating the differences and resolve the complex problem of work styles. We need to keep experimenting through trial and error.

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 Expert Network.

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