(UPDATE – See my follow-up post for more measures of the industry)
To follow up on my earlier take on eikaiwa as the gaijin community’s whipping boy, I want to try and paint a dispassionate, quantitative picture of the eikaiwa industry itself.
Back in summer 2006, I noted that the number of participants (newcomers plus extended contracts) in the JET program had been falling steadily after peaking in 2002 at 6,273. A quick check of the MIC website shows that this trend has continued through 2008 (click image and scroll down for better resolution).
The 2008 total was 4,682, 25.4% down from the peak. I would expect the pace to slow down a bit, considering they recently extended the maximum contract length from three years to five.
In the private sector, METI figures (Excel) show the number of instructors at regulated “foreign language conversations schools” peaked in 2003 at 13,365, but stood at 9,591 as of the end of 2008, down by 28.3% from the peak and 22.4% since the JET Program’s peak.
Figures are less forthcoming about a third segment of the market, non-JET ALTs at schools across the country, but they are available. According to an October 2008 report from the Chunichi Shimbun (thanks Let’s Japan), the number of non-JET ALTs surpassed JETs in 2006, and by 2007 represented 60% of all ALTs or nearly 8,000 people.
(A quick aside: There is some evidence that the education ministry views the issue of “temporary and contract” ALTs as a considerable problem, as these non-JETs can fall through the cracks in terms of supervision, training, and visa compliance. In February 2005, the ministry issued a letter to boards of education nationwide warning them to ensure that contracts with non-JET ALTs are “appropriate” (apparently in response to unfavorable press coverage) (source).)
Unfortunately, I am having trouble locating the exact figures for non-JET ALTs over time. They can be found by combining the totals of education ministry surveys given to schools asking the status of their English-language education. The only trouble is, the surveys are separated by scholastic level; and they aren’t neatly organized by year.
But I was able to find the total for 2002: 3090. So put together, here is the breakdown of “market share” of instructors in all three segments for 2002 and 2007 (click for full size):
Non-JET ALTs appear to be quickly becoming the dominant employment type in the industry. JETs went from outnumbering non-JET ALTs 2:1 from being outnumbered by them 3:2. Possibly on a related note, this ratio (1/3 of all instructors are temp/contract) is consistent with the overall ratio of non-permanent workers in the overall workforce.
The tables were turned for conversation schools vs. ALTs as well. The end of 2007 was right when NOVA collapsed, and before that several other schools went bankrupt. This no doubt pinched the number of private teachers.
Interestingly, the totals of both years indicate that the pie was still growing as late as the end of 2007: the total number of teachers grew 7%, from 21,729 in 2002 to 23,130 in 2007. This growth rate matches the 7.0% growth in US citizen registered foreigners over the same period, though it underperforms the overall 16% growth in the number of registered foreigners (PDF). Japan’s total workforce (seasonally adjusted (Excel)), meanwhile, declined 10.1% during this period.
(Note that there are some considerable limitations to this data, though I think it at leasts provides a good chunk of the overall picture. First, I have included all JETs in the total, out of the consideration (emphasized by Curzon) that ALTs, CIRs, and those special physical education instructors all serve the purpose of “internationalization.” Also, “conversation schools” cover languages other than English, though I think it is safe to say English continues to be the overwhelmingly most popular language. There may be some overlap in the “conversation school” and “non-JET ALT” category as some businesses classified as conversation schools might also list non-JET ALTs as “instructors” resulting in some double-counting. These numbers also do not cover private lessons and unregistered schools, nor does it cover some of the related markets, such as private-sector study abroad, English teachers at universities, full-time foreign English teachers at schools, English teaching services provided by foreign governments such as the British Council, Internet services/podcasts, broadcast lessons such as those given on NHK, and book and CD publishing, all of which could add up to hundreds more teachers.)
Prospects – private sector
Although the supply of teachers grew backed by the surge in non-JET ALTs, eikaiwa as a business appears to be shrinking very fast (Excel). After falling for three years starting in 2003, sales boomed in 2006, whereafter the bottom appears to have fallen out from under the industry (Y axis unit = 1 million yen. Click for full-size):
This precipitous drop coincides with reports at the time of oversupply in the eikaiwa market as the big schools such as NOVA rushed like mad to open schools in every corner of the country. The following years saw the collapse of several schools including NOVA, the former market leader. (UPDATE: this drop also coincides with legal revisions that made it easier for dissatisfied students to request refunds). Teachers may face some serious difficulty as the excess supply adjusts to match demand. This drop in sales far outpaces that of firms listed on the Tokyo Stock Exchange, which are expected to face a year-on-year 6.5% drop for FY2008 (final profits are a different story, but without sales there isn’t much hope of making a profit, is there?).
During this time, Japanese households’ discretionary income fell 1.9% (though slightly less in real terms). With the reputation of the industry damaged and Japanese households concerned about their basic livelihoods, it seems hard to expect that the workers’ desires to make their skills more competitive will save any but the highest quality businesses in this industry.
Prospects – public sector
Meanwhile, recent economic turmoil (annualized 12% GDP shrinkage for Oct.-Dec. 2008 makes Japan the hardest-hit G-7 economy) could put pressure on the public sector as well, as described in a previous comment by Aceface:
I have to wonder how many eikaiwa community understand gloomy future ahead of them. Many local government are now facing rapid decline of corporation tax income due to the down sizing of production in Toyota factories, ANd under such circumstances we can no longer justify this 21st century version of “Oyatoi-Gaijin” we know as JET/ALT.
Aichi, Shizuoka, Gihu, Mie and Gunma need as much Portuguese/Japanese bilingual staffs as possible since there are tons of works must be done starting from job education for the unemployed. And since they have no extra budgets,most likely gone will be “international exchange”related posts.
While I am not sure what the rules are for funding non-JET ALTs (I am assuming schools can choose to use local taxes, or private schools their budgets), the JET program is funded by redistributed local taxes (chihou koufuzei), doled out to prefectures and municipalities at a pre-determined ratio, plus extra for local administrations with particular plans to use the money. The funds come from “the five national taxes” – income tax, corporate income tax, consumption tax, alcohol tax, and tobacco tax. The income taxes have been on a downward growth trend since the 1990s, while consumption tax has emerged to rival those as a revenue generator. The sin taxes have maintained a consistent, relatively low holding pattern. The redistribution amount peaked in 2001 and has been falling roughly in line with the corporate income tax. Though 2008 tax receipts were forecast to be up slightly (possibly due to the tax bills for earlier profits), original finance ministry estimates appear to have fallen far from the mark, failing to anticipate the dismal corporate earnings, rising unemployment, and stagnant consumption. This means the major tax revenue sources are expected to fall significantly.
English teaching in Japan looks like it is in for a very rough patch. While this exercise hasn’t been exactly a happy one, I hope it’s been informative. It certainly has been for me.
UPDATE: I have posted some more data on the industry in a follow-up.
16 thoughts on “English teaching in Japan by the numbers”
This was quite informative. Thanks!
Thanks, I have been meaning to dig up these figures for a while now.
Anyone know any good software to share Excel charts? Google Docs is kind of rudimentary.
While the actual JET salary comes from the redistributed taxes, might the supplemental payments such as subsidized housing or local tax rebates come out of the direct local budget? Does my question even make sense?
Great post. I just hit on this first thing in the morning, so my brain is not yet on fire, but I have some thoughts.
First, I think when you consider the performance of eikaiwa firms – which directly impacts the number of people they employ – you have to look at the role of the kyuufukin program in subsidizing the expansion of eikaiwa schools. At the same time, the reduction in kyuufukin benefits has greatly hurt these schools as it increased the effective costs of their services.
During the heyday of eikaiwa, many schools were able to price their services above market value do to the fact that they actively sought students who were eligible for kyuufukin repayments of more than half of their fees. Students didn’t mind these hefty fees, when they knew that attending 70% of contracted classes meant that they would get back 70% of their tuition.
So, costs at these schools came to reflect a situation that was not real. When kyuufukin benefits were cut to 40%, the number of students naturally declined. Yet, many schools had been counting on easy revenue, and easy sales – after all, their prices had been far cheaper only months before. They had put money in non-competitive business practices and had invested in loss-making ventures because so much of their revenue had been subsidized.
Later, when the Kyuufukin benefit was cut below 20%, these firms started to feel a real pinch. NCB and Lado soon went out of business, and others followed. Their management never realized a way to adjust to the realities of the industry – that having no Plan B when your subsidized profits are suddenly taken away under you like the proverbial rug is suicide in business. The change in consumer laws allowing refunds also hurt, no doubt. Ask former NCB management how much time they spent in 解約相談 versus developing new and more exciting products, if you can ever get one of them to speak on the record.
Second, since Nova is gone, we need to take a look at Gaba. This firm went public in December 2006 at 276,000 yen per share. Sure, the Nikkei has taken a hit since then, but they closed at 14,000 yen per share yesterday, vastly underperforming the index itself. I think this shows quite a bit about market confidence in the industry.
I agree with you that it’s hard to imagine the number of English teachers declining much further. The next year might show further shedding of workers, but once the economy picks up and people have more discretionary spending at hand, there is bound to be an opportunity for expansion. One has to wonder, though, if those firms who expand in the next cycle can avoid the mistakes of NCB, Nova, Lado, Gaba and Berlitz. History leaves a bleak taste in the mouth, and I doubt the industry will ever offer much in the way of real job opportunities.
”I agree with you that it’s hard to imagine the number of English teachers declining much further. The next year might show further shedding of workers, but once the economy picks up and people have more discretionary spending at hand, there is bound to be an opportunity for expansion.”
I don’t know Ken. The economy at large is definitely still on the decline, and I’m not very optimistic about it picking up anytime this year. (Not a formal prediction, just a worry.) If tax revenues drop over a sustained period we could certainly see a cut in the number of ALTs, both JET and private.
BTW, could you (or someone else) please explain the kyuufukin system a bit? I don’t really understand the business model/payment scheme of these English schools chains very well, and I’m sure a lot of people know even less than I do.
Just to be clear, all I said is that the pace of JET’s decline might slow down because they lengthened the program by two years, meaning that the people who get accepted will stay longer, but that might even out as the cycle continues.
Roy: I think of course incidental expenses such as school supplies and maybe the “uwabaki” indoor footwear used by ALTs would be covered by the regular budget, but I imagine that since the program website for applicants describes the housing programs, etc., they must be already budgeted together with the rest of the JET package. That said, the redistributed taxes are considered a source of funds for the general budget alongside direct tax revenue, bond proceeds, etc., so in the minds of the local government it might feel like it is coming out of their “direct” budget.
The deal is, starting in 1998 the labor ministry began offering a program via the employment insurance system that allowed qualified company employees to receive refunds for comlpeted job training in proportion to their length of membership in the employment insurance system, and that included eikaiwa. I don’t see usage stats anywhere, but considering the popularity of eikaiwa in the society one can imagine it remains a top choice.
(1) According to a September 16, 2007 Yomiuri article, initially the program allowed people with a membership history of 3-5 years receive an annual 20% refund (up to 100,000 yen), with people with 5 year plus membership 40% (or 200,000 yen). Starting in October 2007, a law reform eliminated the extra benefits for long-time members and alloweed (1) anyone with at least one year of membership to get 20% benefits for the first use only; and (2) allow multiple refunds for people with three or more years. Five year plus students were allowed to grandfather in their existing arrangements.
(2) According to the labor ministry website, these rates remain in place, and a quick search of the course catalog shows that eikaiwa is still available.
Sources for (2):
Ken, sorry I didnt mention this at first, but thanks for the thoughtful and informative comment.
Is this the system you’re talking about? Are there maybe other subsidies the schools were getting?
I see two possible skews on this data.
First of all, the new 500-pound gorilla in the eikaiwa room, GABA, doesn’t employ teachers (or, at least, doesn’t employ all of its teachers). Its instructors are actually independent contractors. This is why GABA says that they cannot sponsor visas. Essentially, they act as a brokerage between students and teachers, and take a cut of the teacher’s hourly fee in exchange for providing classrooms and the brokerage service.
Likewise, I think there are more people recently who are going solo as language teachers and avoiding the eikaiwa school racket altogether. A few websites have sprung up to introduce these folks to prospective students for a fee. Can’t say how many there are, but I imagine that they elude government statisticians.
Also, on stocks:
I wanted to mention those but decided I kind of had enough to give a rough idea that the business is collapsing. Nova was a Jasdaq company of course. Are there any other eikaiwa schools that floated shares? I am not seeing any
Joe: Good call!
Page 8 of their FY2008 annual report states that while they have 419 employees, they also have
more than1,077 independent contractors. I wonder how many other schools do this? That would deserve another slice of the pie… Also, I didnt check if METI counts those people as instructors or not… I will get back on that.
Personally, I was appalled when I first learned how GABA does business, but in retrospect that was probably because the Japanese corporate world skewed my perspective.
Now it seems like independent contractor arrangements are the wave of the future in the Japanese labor market so long as true “employment” relationships remain legally constrained. Businesses get much more flexibility in managing their manpower with contractors, and the contractors themselves can take advantage of tax write-offs since they become individual businesses (and thus effectively pay tax on profits rather than revenues, thanks to Japan’s ridiculously generous write-offs).
I know a number of people who are doing gangbusters work despite the downturn, and all of them are running smallish consulting firms which step in the shoes formerly filled by employees of the clients.
It’s not just the economic downturn that will affect English teaching in the future. The Japanese population is dropping, which means fewer potential students. This is especially true when you consider that the number of younger students is dropping as average age increases. Of course, this is a problem facing all types of schools, not just English teaching ones.
Adamu, yes, that’s exactly the system and the link I was going to post. Note that NOVA was removed from the list of approved Kyuufukin service providers soon after METI handed down the 6 month suspension of sales activities. I don’t remember the exact date, but to me, that was the nail in the coffin. METI always caught the blame, but MHLW yanked them from the subsidy program.
As far as I know, Gaba and Benesse (Berlitz) are the only two eikaiwa providers that are publicly listed in Japan.
Ret, I agree – and that’s a problem facing Japanese companies across the board.
OK I finally got around to looking more closely at how the METI survey is taken. They do a sampling of the biggest schools and send them this form (see page 16 for language schools):
The schools are polled anonymously and only asked to list their “full time” (専任講師) and “part time” (非常勤) instructors.. But I get the feeling that since GABA adopts a similar classroom format to a NOVA they more than likely would list the so-called contractors as instructors. So in conclusion I think they are already tallied in my graph.
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