News & Infos

Japanese labor market and recent changes

Frank Schulz, Frank Schulz Human Capital Consulting K.K.

How can we attract Japanese professionals?

Di 19.03.2019, 12:12 Uhr

“We have difficulties in finding the right people,” or “there are not enough suitable candidates available in Japan” are only two sentences I am hearing too often. Domestic hiring is without a doubt a question of supply and demand, and method. But there are other factors, too.

Before tackling the topic, let me throw in some general information and statistics.

With a population of 126 million people, the total labor force potential in Japan as of January 2019 consists of 68.3 million people, which cover 61.2 percent of the local population of over 15 years of age. Amongst them, 66.6 million people are employed and 1.7 million unemployed, which results in an unemployment rate of 2.5 percent.

The 1990’s Bubble Economy brought about changes to the local labor market which stretch into the present. These days we face an over-aged society, gradual retirement of the baby-boomer generation, and stagnating career potential for female professionals. We also see rising education levels, which include better information gathering and decision making.

Another topic still flying under the radar is an increase in numbers of foreign professionals. Japan is seen as a country with a low immigration level. So far, an estimated number of 1.28 million foreign nationals are working in Japan legally. This number given by the Ministry of Health, Labor and Welfare is from 2018 and covers blue and white collar workers. Nevertheless, a statistic of the Ministry of Justice counts more people since there is a high chance that not all employers report their number of blue collar foreign workers. Let us book that under ‘corporate creativity’ and move on. 

In December 2018, the Diet passed a revised immigration law to ease these restrictions and allow more workers from abroad. It goes into effect in April this year.

The law introduces a new visa status, divided into two categories. This represents a policy shift, in that the law would create a new work visa status for lower-skilled workers and lower the bar on the level of Japanese proficiency required for workers that apply to enter the country.

Under the first category, non-Japanese workers with certain vocational skills in specified fields will be allowed to stay in the country for up to five years. Under the second category, people with more advanced skills will be permitted to live in Japan indefinitely.

The government estimates an additional 345.000 workers in 14 industries, including construction and agriculture, will be accepted over the next five years.

Japanese Employment Practices Tradition vs. the New

The Japanese employment practice was and is known as “new graduate recruiting” and “lifetime employment” which includes hierarchies and wages based on a seniority system. 

After being hired, the young employee through the years has to learn general skills gathered by “on-the-job-training” and “job rotation” with focus on a long-term career. In the last third of his career, he has to face a bottle neck which divides the middle from senior and executive management positions. No one will be left behind or side-lined in the working group, but not everyone will be able to reach the upper management positions.

Since every Japanese company owns its firm-specific system of education and skills it was nearly impossible to change the employer. So far, this circumstance worked well for Japanese companies.

It may have started as a reaction to the economic-bubble burst, but I personally felt that slight changes have occurred since I began working in the executive search industry here in Japan.

Some Japanese companies have opened themselves for mid-career hiring and the respective performance based payment schemes, also for part-time and temporary workers – although the main reason for the introduction of the latter does not seem to be a pro-active change in human resources management but rather the minimization of labor costs.

Ultimately, this has led to a dual-class employee system, where traditional and modern hiring practices exist side by side and cause an ambivalent situation.

Speaking with regard to the traditional system, a still very common viewpoint suggests that success of a corporation depends on the motivation of its employees and their strong sense of loyalty to and identification with the company.

Because Japanese professionals also tend to be low risk takers, the traditional employment practice nurtures this tendency to connect one’s professional destiny with the company.

As the times are changing, however, a good number of Japanese professionals start to understand that a career has to be planned individually and shall not just be left to the employer’s agenda. In regard to the “work-life balance” discussion, the younger generation also has a different attitude towards working.

What Can a Foreign Company in This Situation Do to Attract Japanese Professionals?

First, start thinking about “employer-branding.” Coexistence in the group-orientated society in Japan is traditionally a matter of information exchange, more intense and detailed as we know it in the western world. The decision-making process is based on a sometimes overwhelming amount of information gathering to reach approval and eliminate risk. This attitude also counts for the individual.

Just to name one example, it is hard to understand why the internet presence of some foreign companies of either size is lacking a Japanese language edition, or information in detail about the organization and activities in Japan, and references by employees.

Offer more than just a position profile by giving a thought to career development. Some foreign companies are too static in this regards. This can mean having a decent approach to trainings, a mentor system, or the introduction of short or mid-term employee dispatching on international level. There are several tools available to foster attractiveness as an employer and also talent and qualification on the employee side.

Create and show commitment to the market and also to your employees. Those concerned will know, if a foreign company owns such commitment or not. It has to be nurtured by the local executive and senior management. It is a question of character and authenticity. Otherwise, it would be difficult to understand why Japanese professionals choose a not well-known small- or mid-sized company as employer and neglect well-known larger players. It also explains why they sometimes accept lower income levels when joining a company, and that the income is not the most important factor to attract employees over here.

Be even prepared to invite family members of potential employees to create good-will. Only a small number of Japanese professionals make a job change decision individually. The “mother in law”-factor, as I call it, is an important parameter to be recognized – even if a “wife factor” is more common in case of a married candidate. The decision of whether a candidate does or does not join a foreign company is – to a certain degree – made within the candidate’s family.

Try to see Japan as a region for itself, detached from Asia-Pacific region models where Human Resources management is handled centrally. Strive for independence, if you are part of a group of companies and Human Resources are handled under one umbrella. Centralized approaches are generally not well received with Japanese professionals.

In case of any questions or remarks please feel free to get in touch!

© Mrsiraphol / Freepik © Mrsiraphol / Freepik
Frank Schulz
Frank Schulz Human Capital Consulting K.K.
Frank Schulz
Frank Schulz Human Capital Consulting K.K.