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Work-life balance and Japan's labor shortage

August 23, 2017

In a new move designed to improve the work and life balance for Japan's employees, the government has announced it will impose an annual cap on overtime hours. Julian Ryall reports from Tokyo.

Japanese employees
Image: Reuters/T. Peter

While the new annual limit of 720 hours has been applauded as a major step forward in a nation known for the punishing hours that employees are expected to work, critics have pointed to a number of problems that the legislation is going to cause.

The first significant drawback to the plan is that workers - whose wages have largely been stagnant for a decade and many of whom rely on overtime pay to make ends meet - will miss out on an estimated Y8.5 trillion (€66.1 million) per year in overtime income. The other unintended outcome will hit the opposite side of the employment equation - employers - who are inevitably going to encounter a dramatic shortage of staff.

Companies in Japan are already struggling with a labor shortage, a problem brought about by a rapidly aging population and families having fewer children, meaning there are fewer people to come into the workforce. Couples are not having children because they are getting married later in life, but the biggest pressure is the sheer cost of raising children in Japan.

Unfortunate timing

The timing of the change to overtime regulations is additionally unfortunate as Japan's economy is at last showing signs of life. Gross domestic product (GDP) climbed four percent on an annual basis in the most recent quarter - the most impressive rate in any of the Group of Seven (G7) nations - with the biggest gains in public consumption and business spending. If that sort of growth can be sustained, then demand for employees is going to climb even higher.

Unemployment is at "decades-low levels," said Richard King, senior managing director of Michael Page Japan, with the figure being quoted at present is of 1.48 vacancies for every applicant.

And the situation is only going to get worse. Japanese firms are looking to expand and the country becomes even more appealing as a tourist destination, with the Rugby World Cup and the Tokyo Olympic Games loom large on the horizon, bringing new economic and employment opportunities.

"Multinationals face a chronic shortage of quality bilingual mid-career professionals of almost every specialist job type, with many Japanese firms also experiencing challenges in securing quality mid-career hires," King told DW.

"This shortage is being experienced in most industry sectors, however the demand in technology-related organizations is extraordinarily high," he added.

As well as being a consequence of the nation's demographic problems, Japan's workplaces are riven by inefficiency and strict hierarchies that encourage entrenched attitudes.

A study by the Japan Institute for Labor Policy Training found that 60 percent of workers declined to take their allotted holidays on the grounds that it would "inconvenience their colleagues." A further 53 percent said they had no chance of taking time off due to their heavy workload.

Read more: Japan - a wealthy nation with poor children

Japan government orders time off for workers

Average working hours

According to the Organization for Economic Cooperation and Development, the average Japanese put in 1,713 hours of work in 2016, higher than the average of 1,363 hours in Germany, 1,472 hours in France and 1,676 hours in the UK.

This figure fails to take into account, however, the concept of what is known as "service overtime" here, meaning unpaid extra hours at work. Service overtime has long been an accepted practice at Japanese corporations but has arguably become more common since the national economy has remained weak and employees increasingly feared for their futures.

In the quarter of a century that has passed since Japan's economic bubble burst, long hours, unpaid overtime, shorter holidays and fewer perks have become the norm at workplaces here, with a 12-hour working day considered completely normal.

Long working hours, arduous overtime and few holidays have given rise to "karoshi," the term for death by overwork, and are believed to be a significant factor behind Japan's declining birth rate.

So what are the potential solutions to Japan's looming labor crisis?

"Japan used to be one of the most productive per-capita nations in the world, peaking in the 1970s before it began to decline in the 1980s," said Makoto Watanabe, an associate professor of communications and media at Hokkaido Bunkyo University.

"Today, Japan is at a critical moment and the decisions that are taken now are going to affect whether restaurants and stores are forced to shorten their operating hours in the future due to a lack of staff, and whether Japanese companies will be able to remain competitive in the global marketplace," he told DW.

"I believe this is a chance to go back and increase our productivity through better efficiency," he said.

Critics point to many ways that might be achieved in the average Japanese office environment, where custom dictates that no one leaves before the boss, meaning that many workers are chained to their desks doing nothing until their superiors have finished for the night.

Read more: Japan, EU narrow differences over free trade agreement

Holidays ignored

Similarly, Japanese workers took only 48.7 percent of the holidays to which they were entitled in 2016, equating to 8.8 days of their annual paid holidays, with fully 60 percent declining to take their allotted holidays on the grounds that it would "inconvenience their colleagues." A further 53 percent said they had no opportunity to take time off due to their heavy workload.

The 2016 figure was fractionally down from the 48.8 percent of holidays they could have taken in a similar study conducted three years previously, despite efforts to encourage people to take their full entitlement of vacation days. The government has now set a target of increasing that figure to 70 percent by 2020.

"The other huge asset that Japan has is women workers, who can be encouraged to return to the workforce after having children," said Watanabe, who added that large-scale automization and robots will soon pick up some of the labor slack.

He shook his head, however, at the suggestion that another solution could be large-scale immigration.

"As far back as the 1980s, it was clear that we were going to have a shortage of workers in the future and the business world has pressured the government to act to make it easier for immigrants to come to Japan. But politics here is very conservative and closed-minded," said Watanabe. "And that is across the political spectrum, from the far right to the centrists to the Communist Party; all of them have agreed that we should keep our doors closed to large-scale immigration."

Julian Ryall
Julian Ryall Journalist based in Tokyo, focusing on political, economic and social issues in Japan and Korea