Shortage of Labor Threatens Japan’s Corporations

Where have all the workers gone?


March 28, 2018

  • Akane Yamaguchi


◆Many of Japan’s corporations are experiencing a shortage of labor, and this problem is affecting corporate management in some very real ways. Most corporations handle the problem by increasing overtime hours. However, this approach will become more difficult once the new ruling which puts a cap on overtime hours goes into effect (Regulation with Penalties on the Limitation of Number of Overtime Hours Worked). Moreover, this development may lead to an intensification of competition to secure the necessary number of employees.

◆In order to promote long-term growth, corporations need to move urgently on the problem of labor shortage. In this report, we examine the question of how or where corporations can find the workers they need (Where have all the workers gone?). Potential growth in the supply of labor, based on certain conditions, has been confirmed to be 430,000 men between the ages of 15 and 64, 1,860,000 women between the ages of 15 and 64, and 330,000 senior citizens age 65 and older. However, labor force participation on the part of these potential workers will not be possible without labor reforms on both the institutional level and on the level of social awareness. The number of hours worked per part-time worker have continued to decline in contrast to the growth seen in hourly wage. If this trend can be reversed by making changes to the marital deduction on income taxes in Japan, the number of man-hours in macro terms could attain major growth.

◆There is also the question of how best corporations can retain existing employees. This requires the development of an employee-friendly work environment, and the improvement of labor conditions.

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