How Japan Can Cope With Decreasing Labour Force?

Osaka – Sunday, February 14, 2010

Nikkei, specialized in economy/business and politics, reported on February 12 that lavour force* for 2009 was less than 60% of the total population over 15 years old for the first time after Word War II. This trend is prominent compared with other countries worldwide, and could well become a negative factor for economic growth.

1. What is the trend of Japan’s labour force, compared with other countries?

Japan’s labour force trend is quite different from those of other countries.

1) Japan’s Labour force has been on the decline in the aging society.

Japan’s labour force has once increased during high economic growth then started to decrease. The arrival of the aging society has been recognized for quite a long time and the effect has been prominent in the last 5-10 years, especially in the last few years. Labour force declined for 2 consecutive years to become 59.9% in 2009, the lowest since 1953, when statistics are available for comparison.

2) Only Japan’s labour force has been on the decline.

According to comparison with statistics of ILO (International Labour Organization), labour force of major countries for 2009 varies from country to country and some are less than that of Japan, but Japan is the only country that has been on the decline. Labour force of Western Europe such as France and Germany was 59.1%, 65.0% for the U.S. and 73.7% for China.

Although Western Europe was below Japan, none of these countries worldwide has been on the decline like Japan. For 2009, the U.S. is expected to increase by 0.4%, China to increase by 1.0% and Western Europe by 0.1%. However, according to MIC (Ministry of Internal Affairs and Communications), Japan’s labour force for 2009 was 66.17 million, which is decrease by 0.5% from 2008, and that it has decreased 2 consecutive years.

2. What is the outlook of Japan’s labour force?

The outlook of Japan’s labour force differs between ILO and the Japanese government. The Japanese government estimates that number of workers increase attributing to their employment policies and therefore the labour force remains at 59%. However, ILO estimates that it will decrease to 56.3% by 2020.

3. What is the reason for consecutive decrease in Japan’s labour force?

There are several reasons for Japan's consecutive decrease in its labour force.

1) Baby boomer generation has been retiring.

The fact that baby boomers has been reaching the age of retirement (60 years old) in the aging society is the biggest factor for decrease in labour force.

2) Less young people manage to get a job.

In the recent tough job market, less young people are successful in getting their job. According to recent reports, many people to graduate in March 2010 are still struggling with job hunting, when in time of stronger economy and job market many of them are usually offered a job by autumn, about 6 months before their graduation. Nikkei also points out that with such a tough job market, more young people give up even starting their job hunting. Nikkei and other news media also reported recently that some young people started to seek job outside Japan, such as in the U.S. and Asia.

4. What are possible ways to overcome negative impact of decrease in labour force on the Japanese economy?

In short, it is making diverse people entering job market, in addition to economic growth meaning activating job market. Possible solutions are as below.

1) Promote retired people to continue working.

Official retirement age is 60 in many companies, and government has started to request companies to re-hire employees reaching retirement age. This would contribute to leveraging their full-fledge expertise and know-how.

2) Promote women to work after marriage and have children.

Japan is behind other developed countries in this Diversity & Inclusion issue although they have started to initiate. They can further learn best practices from other countries and implement measures meeting situation, manners and customs etc. of Japan while changing the total system and infrastructure of the society. Some topics include day-care centre, child-care leave system, and work sharing to name a few. Of course, change in everyone’s mindset is vital.

3) Obtain help of talents/workforce from abroad.

Obtaining manpower from abroad is another solution. Being an island country with history of 200 years national isolation, contrary to countries such the U.S. that are rather open and proactive in accepting talents/workers from abroad, Japan has been behind in this field. Japan how has started to have talents/workers from Asia (e.g. Indonesia, China) to make up for shortage in workers of healthcare (caregiver) and agriculture (farmers) that are extremely critical. But these measure as rather “reactive” measures.

The author feels that Japan would need to take more “proactive” measure to attract talents/workforce with long-term strategy, with learning from other countries, including smaller countries such as Singapore, Finland and Columbia that successfully took corporate strategy approach. They positioned themselves carefully to develop vision and strategy and successfully implemented, such as to become country strong in medical, welfare, IT, environment etc. and focused on investing and attracting talents/workforce/capital from around the globe in that particular industry, while improving systems and infrastructures of total society aligning with the total strategy.


After all, this issue is all about how to make Japan an attractive place to invest and do business in, and making it competitive in the global economy.


* Labour Force (from Nikkei, edited and translated by the author)
Labour force is sum of employed (employees in companies/organizations and as business owners) and unemployed (people who are hunting for a job). This is one of the metrics showing economic poser of a country. People who have retired, given up job hunting, full-time housewife and students not include in the job market are excluded in labour force.