For­eign help wanted to ease Ja­pan's la­bor short­ages: IMF

The Pak Banker - - 6BUSINESS -

Take a walk in Tokyo, and you will see the sign of "Staff Wanted", out­side many restau­rants and con­ve­nience stores. These busi­nesses of­ten find it im­pos­si­ble to re­cruit the work­ers they need. Ac­cord­ing to re­cent sta­tis­tics, for each job seeker in Ja­pan ap­ply­ing to work as a waiter, there are more than three avail­able po­si­tions. Home helpers and long-term care­givers are equally in de­mand. If you want to work as a se­cu­rity guard, you can choose from around five open­ings, and for some po­si­tions in the con­struc­tion busi­ness the job-to-ap­pli­cant ra­tio is over six.

Ja­pan's la­bor short­ages are the re­sult of both a shrink­ing pop­u­la­tion, which lim­its the over­all pool of work­ers, and skill mis­matches. The re­duced sup­ply of la­bor is one of the fac­tors bring­ing down medi­umterm po­ten­tial growth, which the In­ter­na­tional Mon­e­tary Fund es­ti­mates at just 0.6 per­cent. La­bor mar­ket short­ages are also bad for short-term growth, be­cause they re­duce the ef­fec­tive­ness of the mon­e­tary and fis­cal stim­u­lus that the author­i­ties are us­ing to try to boost de­mand.

Ja­pan's short­ages are large from an in­ter­na­tional per­spec­tive. The ra­tio of job va­can­cies as a per­cent­age of the la­bor force pop­u­la­tion-an in­di­ca­tor of la­bor short­ages-stood at 3.2 per­cent in 2013 in Ja­pan. The same fig­ure is 1.1 in Ger­many and 2.5 in the United States.

Against this back­ground, our re­cent re­search pa­per looks at pos­si­ble pol­icy so­lu­tions. These in­clude: Mov­ing to­ward more cap­i­tal in­ten­sive tech­nolo­gies by in­creas­ing in­vest­ment. At­tract­ing more work­ers into the la­bor force by in­creas­ing wages. In­creas­ing la­bor sup­ply from un­der-rep­re­sented de­mo­graphic groups.

Train­ing, and other ac­tive la­bor mar­ket poli­cies. In­creas­ing the sup­ply of for­eign la­bor. In sev­eral of the above ar­eas, progress is un­der­way. On­go­ing cor­po­rate gov­er­nance re­forms, for ex­am­ple, are ex­pected to en­cour­age in­vest­ment, and the re­cent in­crease in fe­male and el­derly la­bor par­tic­i­pa­tion can help re­duce short­ages. Cur­rent ef­forts to en­cour­age wage growth, for ex­am­ple through the Tri­par­tite Com­mis­sion, can also help at­tract more work­ers in the la­bor force. In ad­di­tion, Ja­pan could con­sider fur­ther dereg­u­la­tion, and de­vot­ing more fis­cal re­sources to ac­tive la­bor mar­ket poli­cies. In­creas­ing the sup­ply of for­eign la­bor, how­ever, has re­ceived less at­ten­tion in the pol­icy de­bate, even though there seems to be scope for it. Low his­tor­i­cal immigration rates are re­flected in the fact that Ja­pan's re­liance on for­eign la­bor is only 0.3 per­cent-the low­est among ad­vanced coun­tries. The cur­rent growth strat­egy-the so-called "third arrow" of Abe­nomics-in­cludes some mea­sures to in­crease for­eign la­bor sup­ply: Re­lax­ing immigration re­quire­ments for highly skilled for­eign work­ers. Plans to al­low for­eign do­mes­tic helpers to work in Spe­cial Eco­nomic Zones. Plans to al­low busi­nesses to bring for­eign em­ploy­ees to Ja­pan for short-term train­ing. While these mea­sures go in the right di­rec­tions, they will have only a lim­ited im­pact in re­duc­ing la­bor short­ages, par­tic­u­larly in the most severe­ly­hit sec­tors such as con­struc­tion, se­cu­rity guards, ser­vices, and nurs­ing. Draw­ing on the ex­pe­ri­ence of other coun­tries, Ja­pan could con­sider some ad­di­tional steps to at­tract more for­eign work­ers, such as in­tro­duc­ing guest worker pro­grams, and loos­en­ing en­try re­quire­ments in sec­tors with la­bor short­ages-in­clud­ing for lower-skilled jobs. Ja­pan could move in the di­rec­tion of poli­cies adopted by other coun­tries, such as Aus­tralia, Canada, Sin­ga­pore, South Korea, which use quota sys­tems aimed at mak­ing de­ci­sions on ad­mis­sion of for­eign work­ers on the ba­sis of eco­nomic needs. It could also con­sider al­low­ing cer­tain in­dus­tries-as the min­ing sec­tor in Aus­tralia doesto en­ter into di­rect agree­ments with the gov­ern­ment to fill la­bor short­ages. In­tro­duc­ing a uni­form and com­pre­hen­sive qual­i­fi­ca­tion frame­work to per­form skill ac­cred­i­ta­tion would also help. One pos­si­ble po­lit­i­cal ob­sta­cle to ex­pand­ing the for­eign la­bor sup­ply is the fear that the so­cial costs of immigration will out­weigh the ben­e­fits. Anec­do­tal ev­i­dence sug­gests this is a wide­spread fear, but there are very few of­fi­cial es­ti­mates. One study by Iguchi, sug­gests that, in the case of tem­po­rary immigration, the fis­cal ben­e­fits would be larger than the costs for Ja­pan as­sum­ing the for­eign work­ers stay in Ja­pan only tem­po­rar­ily.

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