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Will labor shortages change our current work styles?

Kazuya Ogura
Professor, Faculty of Commerce, Waseda University

As income disparities widen, conservative forces emerge in various countries, and escalating efforts to reject immigrants and take protectionist measures in international trade are observed. Income gap is a major problem yet difficult to stop due to the complicated and closely entwined world economy. Protectionism, which is easy to advocate, could trigger domestic price hikes, exacerbate economic downturn and increase unemployment.

In Japan, where population decrease, low birthrates and population aging continue to progress, businesses will increasingly look for ways to survive in the global economy as domestic purchasing power weakens. Additionally, domestic production capacity will also decline. According to the Japan Institute for Labor Policy and Training (JILPT), Japan’s workforce is expected to decrease in the future. If the economic growth rate remains almost at zero percent and the labor force participation rate by gender and age group remains on the same level as it was in 2014, when the workforce population was 65.87 million, it will total 58 million in 2030. This is a decrease of 7.87 million people. Likewise, even if the economy grows substantially at a rate of 2% and the workforce participation of women, the elderly and other groups increase, the number of workers will only be 63.62 million in 2030, down by 2.25 million.

In order to make up for this shortage of millions of workers, encouraging social participation by women, the elderly, people with disabilities, foreigners and the like through employment will become crucial. Due to limited space, this article will only discuss the cases of women and the elderly.

Many women begin their careers as a full-time employee of a company, but maternity leave leads them to step of the labor market. Later, they rejoin the workforce but often work part-time instead. Furthermore, many elderly people are considered to have already finished contributing to society as workers. When they reach the retirement age of 60, it is common for most people to continue working on an annual contract with a considerably reduced salary until they reach the age of 65 (Legally, continued employment until the age of 65 will become mandatory in 2025, but a number of businesses have already adopted this system). After 65 years old, the elderly have fewer job opportunities in order to make a living. In particular, large corporations rarely continue to employ those who are over 65.

It is almost certain that Japan will suffer labor shortages in the long run, and currently, women and the elderly are not being effectively employed as workers. This is heavily influenced by Japanese employment practices.

One issue is the way people join the labor market. In Japan, most young people are employed with the status of full-time employee by businesses and other organizations directly after they graduate from school. Obtaining this status, which ensures long-term, secure employment, is the most important thing for a student when they go job hunting. Of course, since various problems occur to both businesses and workers, this is not a 100% guarantee. Typically, businesses first look for workers according to the job type and description, and candidates with relevant experience apply for the position in most parts of the world. However, this is not the case with Japanese students. Japanese university graduates are hired based on their part-time job experiences, participation in academic clubs and latent abilities such as communication skills and personality, in addition to the prestige of the university they attended. The idea is to recruit someone who can perform any job in the future. Therefore, those who are selected according to such criteria gradually demonstrate their potential through in-house training, and eventually, become core personnel at their company.

If long-term employment is assumed as the norm, workers, such as women, have difficulties returning to the workforce once they step out of their former career path. Those who have reached mandatory retirement are also not readily counted as an important part of the workforce because they can only be employed for several years.

Work styles are also a major problem. In exchange for their guaranteed status as a full-time employee, most people are obligated to follow company orders, such as job transfers and working overtime and on holidays. Japan is notoriously known for its long working hours, but this is an urgent issue that needs to be addressed in order to grapple with labor shortages. Long working hours is a major reason for the country’s declining birthrate, which discourages young people to get married and have children.

Recently, the Japanese government has been trying to eliminate long working hours, and businesses are also pushing their reforms in response to the government’s initiative. These efforts have just begun, but they will be essential for changing Japan’s work styles and economic growth.

From the viewpoint of long-term human resource development, resolving the issue of membership in the labor market is no easy matter. Yet, there are many cases in which businesses successfully reduced the number of people working long hours. Although this applies mainly to white-collar workers, finding and eliminating inefficient processes at work is an example. Many meetings did not have a clear purpose, and the number of people attending them was more than necessary. Businesses that could solve these problems saw reduced working hours. Companies that used different formats for similar documents achieved greater operational efficiency by changing the documents to a single format. By reducing the number of large-lot customers and increasing small-lot ones who were willing to work flexibly, companies bound to long working hours due to their customer’s convenience reduced overtime to zero. An increase in productivity was also realized when employees were able to concentrate on their own work. Each one of these may only be a small improvement. Nevertheless, reexamining work styles is the only way to move forward. If many businesses change their work style, workers can satisfy various needs in their private lives, and people whose potential have been overlooked will be allowed to join the labor market with much ease with their own initiative.

Unless changes are made in the way people currently work, Japan’s future will be in further detriment.

Kazuya Ogura
Professor, Faculty of Commerce, Waseda University

Professor Ogura completed the doctoral program at Waseda University’s Graduate School of Commerce in 1993. He worked for the Japan Institute for Labor Policy and Training from 1993 to 2011. He served as associate professor at the Faculty of Commerce from 2011 and became professor in 2016. His major publication includes A Study of Full-Time Employees (Nikkei Publishing Inc., 2013).