The health and labor ministry’s White Paper on the Labor Economy (link) came out last month. It’s stuffed with statistics, but today I would like to focus on what it’s got to say about Japan’s foreign workforce, and then think about what implications a major increase in the amount of foreign workers would have on the Japanese economy.
- At the end of FY2006, there were 755,000 legal foreign workers in Japan, double the 370,000 in 1996 (A recent NYT article claims it’s actually “more than a million” in 2006 vs. 700,000 in 1996 but the author does not cite where he got that number… UPDATE: it appears to include the number of foreign spouse visas, which can be found at the justice ministry (PDF)). 180,000 are on “professional” visas and work as engineers, programmers and other specialized fields (This number includes 57,000 here on language teacher visas cultural/humanities visas (I am interested to see what the impact from NOVA’s closing has had on this number…) and 35,000 on technical/engineer visas). There are 35,000 Nikkei Brazilians working in factories, etc. 95,000 are here on the controversial technical trainee program. A whopping 110,000 foreign students are working part-time (15% of all foreign workers in Japan and 90% (!) of all foreign students).
- The report points out that Japan’s rules on letting in foreign labor are actually quite liberal in the cultural cultural/humanities (mainly language teacher) and technical (engineer/programmer) categories. 62% work at companies with less than 300 employees, and 45% are non-permanent. 64.8% make an underwhelming 200,000-299,999 yen per month. 61% of technical visas go to “data processors” while 58.8% of cultural visa holders are language teachers or otherwise in education, leading the report to conclude that the country is not utilizing specialized foreign labor in core corporate activities such as development, design, and international trade.
- The ministry plans to promote a system to facilitate permanent employment for foreign students after they graduate. A survey of companies found that the biggest reason that foreign students in Japan did not seek jobs was “limitations for foreigners to succeed in a Japanese company” (34.5%). On the other hand, companies surveyed cited a “lack of internal infrastructure (communication issues, etc.)” (44.9%) and a general “negative [stance toward] hiring foreigners” (43.8%) as reasons why they did not hire foreigners. Such companies’ views of foreigners included “strong self-expression” (42.6%) and a lack of “loyalty” (29.4%). Of the mere 10% of companies with experience hiring at least one foreigner, 80% said they would continue to hire foreigners in the future.
- Ironically enough, two thirds of foreign students study humanities or social sciences, while two thirds of the labor demand from firms is in the hard sciences and engineering.
- Citing larger numbers of foreign laborers as necessary to “bring vitality and internationalization to the Japanese economy,” the report calls on companies to reform their attitudes towards hiring foreigners and the structure of their labor management systems, and colleges to attract more foreign students based on companies’ needs.
In previous discussions on this blog and elsewhere, a general consensus seems to form around the basic lines of the above-mentioned NYT article:
With Japan’s population projected to decline steeply over the next decades, the failure to secure a steady work force could harm the nation’s long-term economic competitiveness.
... experts say that it will have to increase by significantly more to make up for the expected decline in the Japanese population.
I very rarely see an argument in the J-blogosphere to contradict this idea that Japan’s shrinking, aging population is destined to doom economic growth, bankrupt social services, and quite possibly cause social turmoil. Therefore, goes the argument, this situation must be avoided or alleviated by any means – encouraging people to have more children, employing the elderly, and last but not least bringing in more and more foreign workers.
Dean Baker, a liberal-leaning US economist, is critical of this approach:
The focus of the article is a village where Chinese workers are brought in to pick lettuce. Presumably, farmers would have to pay much higher wages to get Japanese workers to pick their lettuce. This could make lettuce growing unprofitable in Japan. The result would be that the land would be used to grow other crops, or it could even be left available for other uses. Since most farming is heavily subsidized in Japan, if land was pulled out of agricultural production, it could mean substantial savings to the government.
One of the other potential problem mentioned in this article is that a chain restaurant may be forced to cut back on its plan to triple its number of stores because it can’t get enough workers.
These are useful examples for showing why a declining population does not pose an economic problem. Japan has no special interest in maintaining its lettuce production, if it proves not to be an economically viable sector. If farmers cannot make a profit paying the prevailing wage to grow lettuce, then there is no obvious loss to the country if the lettuce industry is allowed to disappear. Similarly, Japan has no special interest in seeing this restaurant chain triple in size if the market conditions will not support this growth.
In the Nikkei Shimbun’s Economics Classroom (Keizai Kyoshitsu) column, Mieko Nishimizu, a former vice president of the World Bankand current fellow at a METI think tank, takes this basic line of argument into more detail as she outlines proposals to turn Japan’s demographic crisis into an opportunity to improve the lives of the citizenry. She sees three basic “silver linings” to Japan’s declining population:
- Progress in “capital aggregation” will dramatically boost productivity. Labor shortages will put pressure on producers to get more output from each employee. If the producers cannot count on foreign labor to fill that gap, all the better for Japan’s productivity growth. That growth, she says, will come from Japan’s advanced robotics technology as well as scientific and information advances. Knowledge industries will become an important source of economic growth.
- The nation will respect its older citizens more. Those over 60 will be seen as vaults of knowledge and experience, elements critical to knowledge based industries. Such pressures will likely end Japan’s system of retirement at a fixed age (65 now). The freedom to work will give the elderly the chance to choose when they want to retire, and those extra productive years will alleviate overall social security expenditures. For this to work in an era of advanced life expectancy, medical technology has to be ready to make those later years more livable, in a manner that’s fairly available to all citizens.
- Out of necessity, women will be required to balance work and child-rearing (no mention of men’s role in child-rearing in this essay). But that means Japan will finally need its women to work. If Japan can be a nation where women can exert leadership in companies with flexible management, competition for good talent will break all glass ceilings. In part to facilitate women’s participation in the workplace, companies will grow ever more eager to achieve employee satisfaction, by allowing more family time and permitting telecommuting. She cites studies that a happy home life leads to a more productive workforce. And happier home lives might just produce more children.
As she mentions in passing early in the piece, the implications of this scenario are that immigration as a supplement to the work shortage would just get in the way. To Nishimizu, hastily letting in immigrants poses “more than just an lost opportunity for Japan to make great strides, it would produce immeasurable costs.”
The point of managing an economy is to improve quality of life, she says, not to pursue a certain population number. The important thing is to work toward a society where people feel secure about the future. This will produce a justified feeling of belonging and work to stabilize the country.
To have a successful immigration policy, Nishimizu argues, Japan will first of all need to work toward improving quality of life. But Japan also must be ready to open up, to share its culture in a broader sense. Without that, newcomers will have no incentive for them to develop a feeling of “belonging” to their adopted home. They’ll just feel like unwelcome outsiders. But the desire to get a piece of Japan’s wealth will inspire more people to take citizenship and provide a long-term contribution to society.
Baker and Nishimizu argue that we should be a little concerned about the population decline, but let’s not panic and do anything rash. What are some of the doomsday scenarios of a 20-30% decline in population? Sure we might have to live with one Yoshinoya for every 126,000 people instead of every 42,000. And we might have to start consoldating the dozens of tiny, unproductive businesses that scatter Japan. But why not focus on fixing the problems instead of doing the same old thing again and again?