The biggest contributor to Japan’s tightening labour market is a widening occupational wage gap, a result of faster wage growth in some high-skill occupations.
The share of graduates in Japan’s population has grown at a slower rate than other countries, causing its education flexibility score to rise.
Japan’s already high participation rates are expected to grow at a slower pace this year, potentially putting pressure on firms seeking to expand.
Managing Director, Hays Japan
There is an acute labour shortage in Japan and the working-age population is shrinking, yet it has one of the lowest unemployment rates in the world. There are two sources of hidden slack: rising participation rates, especially females who are mainly taking up part-time employment, and immigration, with the share of foreign workers below 2% and mainly made up of students and trainees in lower paid and part-time work. Neither of these factors addresses the underlying shortage of talent for high-skilled occupations; and despite this wages have not risen markedly ignoring pressure from the Government and Bank of Japan. There are opportunities to defer the retirement age, utilise contractors, and loosen immigration restrictions for skilled migrants to help address skills shortages.
Marc Burrage, Managing Director, Hays Japan
Unemployment in Japan reached a 25-year low in early 2018, standing at just 2.5%, following nine years of decline.
Further signs of a tight labour market come from the Ministry of Health, Labour and Welfare’s business survey, which reported that 40% of firms felt they had an insufficient supply of full time employees in 2017 – its highest level since the series began
ten years ago. Only 3% of firms thought they had excess supplies of labour.
This tight labour market is likely to be exacerbated by the ageing demographics of Japan, with working-age population projected to decline by 0.7% a year over the coming decade.