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Business trends

As talent race heats up, Japan Inc. fattens pay for tech experts

One in three IT engineers enjoys pay increase of 10% or more after job change

Demand for experienced engineers, particularly in information technology, is surging in Japan, breaking down rigid employment practices.   © AP

TOKYO -- A battle for skilled information technology workers is unfolding across a range of industries in Japan, spurring employers to go after experienced people at rival companies, particularly those in their mid-30s and older.

IT engineers are especially prized, often pocketing big pay raises after switching jobs.

According to a survey conducted between April and June by Japanese job placement agency Recruit Career, 32.3% of IT engineers saw their salaries rise by more than 10% after changing jobs, an increase of 5.6 percentage points from the same period a year ago. The figure was highest since comparable data became available in the April to June quarter of 2008.

With new technologies such as artificial intelligence and the internet of things taking off worldwide, job seekers in IT are enjoying a seller's market.

A Ministry of Economy, Trade and Industry survey in 2016 found that wages in Japan's IT sector were slightly less than twice as high as the average across all industries. In India, by contrast, IT workers earned around nine times the average wage. In China, they earned about seven times as much. Although some of that difference is due to higher overall wage levels in Japan, workers in the IT industry may continue to see strong pay growth.

In Japan, the job openings-to-applicants ratio for information processing and communications engineers stood at 2.48 in fiscal 2017, according to the Ministry of Health, Labor and Welfare, up from 1.38 five years earlier. The worsening labor shortage is beginning to pinch, and employers are offering bigger compensation packages to experienced people.

The full-year data reveals differences compared with earlier trends. In fiscal 2017, nearly 30% of IT engineers said that their pay went up more than 10% after switching employers, a rise of more than 8 points versus fiscal 2013, according to Recruit Career. By industry, the share of job hoppers reporting pay increases of 10% or more was 30% in IT, 25% in manufacturing and 19% in consulting.

From fiscal 2009 to fiscal 2011, as Japan recovered from the global financial crisis, the share of IT engineers who reported a rise in pay after changing jobs rose 6.9 points. At the time, pay increases were skewed heavily in favor of IT engineers. Nearly 60% of those reporting such a pay rise during the three-year period were in IT, while fewer than 10% each were in manufacturing and consulting. Those wage increases are now spreading to other industries.

In manufacturing, automakers are scrambling to find experienced IT people as they try to get a leg up in the competition to develop autonomous driving technology. The salary of one 30-something engineer jumped to about 8 million yen ($72,000) from around 5.5 million yen, after being recruited by a carmaker.

A second big trend is that employers are taking less notice of applicants' age as the need for people who can crunch numbers grows. Once upon a time, 35 was considered the age limit for midcareer hires in Japan. That is no longer true. In the auto industry, for example, demand for older engineers is rising.

Over the four years through fiscal 2017, a quarter of the IT engineers reporting a pay increase of 10% or more following a job change were 36 years old or older. According to a Recruit Career representative, this "clearly refutes the notion that the age limit for changing jobs is 35."

In e-commerce, too, veteran engineers are sought after. Start Today CEO Yusaku Maezawa recruited expert engineers through Twitter, offering salaries of up to 100 million yen. The company manages the online fashion website Zozotown.

Flea market app operator Mercari has stepped up its recruitment, hiring engineers to develop the company's AI and emphasizing user convenience and security. Mercari says it has no fixed limit on salaries for new recruits, provided they have the necessary skills. The company is also casting its eye overseas in the search for talent. It set up a subsidiary in the U.S. and is hiring people from companies such as Google.

As the ability to make sense of data becomes a critical skill, job hoppers with the right tools find themselves in the driver's seat. Companies in Japan are beginning to rethink rigid pay scales based on seniority, for example.

By 2030, Japan's IT sector is expected to be short by 590,000 workers, according to the Ministry of Economy, Trade and Industry. If Japan does not want to be left behind in the global race for IT talent, it will have to work harder to pay people what they are worth.

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