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29 September 2016

A multi-stream migration policy is being deployed to combat acute labour shortages in sectors of the Japanese economy, but migrant workers won’t be enough to solve the long-term challenges of Japan’s demographic implosion, Stephen R Nagy writes.

On Wednesday 21 September 2016, while in New York for UN meetings, Japanese Prime Minister Shinzo Abe was quoted as saying “I have absolutely no worries about Japan’s demography” arguing instead that “Japan may be aging. Japan may be losing its population. But these are incentives for us.”

Despite this optimistic viewpoint, the facts about Japan’s demographics and their impact on the economy are clear. According to the Committee for Japan’s Future, Japan’s total labour force will decline to 55 million by 2060, even with the elderly working to 70 years of age. Furthermore, the National Institute of Population and Social Security Research in Japan projects that an elderly population that teeters on 40 per cent of the total population will heavily burden the remaining workforce. These labour shortages will result in decreased economic dynamism, a smaller tax base and emasculate Japan’s ability to promote its national interests both domestically and internationally.

Currently, Japan’s labour shortages are not being felt equally across the economy. Labour shortages are more acutely experienced in particular sectors such as construction, transportation, commerce and the services sector for several reasons. First, these sectors are characterised as blue collar or kitsui, kitanai and kiken (difficult, dirty and dangerous) and have been unattractive to university graduates since at least the 1980s. Second, these jobs are by-and-large low paid and subject to irregular hours compared to full-time, white-collar jobs. Third, in concert with a declining number of new graduates entering the workforce, and a relative improvement of the Japanese economy for middle-class workers, the unemployment rate has dropped to 3 per cent.

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To combat the labour shortage trend, the Liberal Democratic Party’s special committee on labour force policy has proposed increasing the number of foreign workers while assiduously avoiding any discussion of immigration. The proposal sees myriad migration categories broadly trifurcated into three streams: the highly-skilled foreign professional, non-skilled workers, and targeted migration streams. In the highly-skilled foreign professionals stream, migrants who work in international firms, set up innovative businesses and invest in Japan are generally welcome. Their entrance into the country is facilitated and they are encouraged to adopt permanent residency through various migration schemes. Abe has even decreased the wait period from five years to less than three years for certain categories of legal foreign residents wishing to apply for permanent residency.

Targeted migration schemes are generally oriented towards occupations such as artists, teachers and other areas in which native Japanese people would be unsuited or where there is a shortage of workers, such as in healthcare. Their migration status can be renewed indefinitely or in some cases, such as with healthcare providers from the Philippines and Indonesia, they can move from being a secondary healthcare provider on a three-year contract to being registered nurses in Japan after passing the national qualification examination that is conducted in Japanese. To date, retention of health care providers has been very low, both because of the exam but also as a result of workplace integration challenges.

In the non-skilled stream, migrants work as trainees in the services sector in part-time jobs while studying at Japanese universities and colleges.

Importantly, these migration categories ensure that migrants do not take jobs away from middle-class Japanese. They ensure that the migration status is temporary for non-skilled workers and that positions in those sectors of the economy with the greatest labour shortages are filled. In short, temporary migration schemes have been at the centre of the labour shortage debate as a way to target sectors of the economy that are unattractive to average Japanese workers.

This strategy may be able to mitigate labour shortages in sensitive sectors while the government attempts to mobilise more workers through increasing the age of retirement and by so-called ‘womenomics’, the Abe administration’s plan to increase the representation of women in the workplace, management positions and leadership roles. A crucial part of this approach to deal with labour shortages is policies to increase the productivity of Japanese workers through structural change, technology and a more open economy.

Long-term, these approaches may not be enough to fully mitigate the challenges of Japan’s demographic conundrum. Even the benefits accrued from increasing the birth rate per family to two to three children would not stem Japan’s demographic decline or remedy labour shortages. Prominent immigration thinkers, such as former Tokyo Immigration Bureau Chief Sakanaka Hidenori, are instead left to ponder the unthinkable – a future where immigrants are accepted at a level equivalent to 10 per cent of the Japanese population.

Sakanaka’s vision of an immigration nation in which migrant workers contribute to Japan’s demographic, economic and cultural renaissance, although praiseworthy, is as unrealistic as Abe’s comments in New York were insincere. Japan’s demography is quite clearly a concern, regardless of whether or not the government is willing to admit it. Immigration will not be the ultimate answer to solving Japan’s urgent labour shortages.

Dealing with the much greater challenge of Japan’s demographic implosion will require an immigration strategy with Japanese characteristics that has appropriate and robust integration policies to maximise the human capital that comes to Japan but also minimises intercultural and interethnic friction in a country with little ethnic and cultural diversity in mainstream society.

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3 Responses

  1. Edo Naito says:

    Exellent article as usual Stephen. Since 2013, 2 years following Fukushima, the foreign population in Japan has continued to grow about 10% YOY and by the end of this year it should exceed 2% of the total. That 2% covers all three categories you note in your article – highly skilled, non-skilled and targeted migration. All three categories have benefited from some targetted programs and have been growing, albeit slowly. Attracting more financial and other regional HQs which in the 80s, ’90s saw Tokyo as the ideal location but as Japan bubble burst, costs climbed and lost decades set in these HQs were lost to HK, Singapore and some to Shanghai. The battle to attract these should now be between Singapore and Tokyo given costs and local risks and Koike and Abe sould be working hand in hand to restore Tokyo’s earlier position. Increasing Japanese university openness tor foreign graduate students would support the target migrations. Large numbers of Chinese mainland grad students are now choosing Japan. But in the end I agree with you – classic US/Canadian immigration will not be the answer so a major sustained effort is required for automation in service sectors to drive productivity needed to support increased living standards..

  2. Whitesnake29 says:

    I’m sorry to say this but Mr. Abe has Ben insincere with a lot of things. The Fukushima problem is under control. He promised to not deal with the constitution problem during last election. It’s the only thing on his agenda this month., etc. He came to take reins again with only one idea in mind: reestablish Japan as a military power for which he needs the constitution revised. Nothing has really work for Mr. Abe. The only success he’s had is totally out of Abenomics: tourism. As a long time resident I don’t see what the future holds here. The population time bomb is but one. Education, internationalization of youth, etc. are also future issues that must be dealt with now. Don’t want to be cynical but many of these young kids will end up on the front line should Abe’s desired constitution changes go through.

  3. F.P.Rooney says:

    There has within the past few weeks been an article in the Nikkei Asian Review the gist of which was that with an acceleration of automation which is expected to follow the realisation and implementation of self driving vehicles, the problem which Japan will face will be unemployment, perhaps as much as of 50% of the working population. It would appear that the technology which will result from self driving vehicles will lead to an almost complete automation of the operation of factories. One human supervisor will be all that will be needed to operate a factory.

    This idea, redundancy of labour arising from automation, had also been expressed some time ago in an article in the Financial Times.

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Nagy, Stephen R. 2016. "Is Immigration The Answer For Japan? - Policy Forum". Policy Forum.