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Economy

Japan relying on foreigners more to plug labor holes

Influx of women and seniors not enough to offset the overall population drop

Many of Japan's convenience stores and other retailers rely on foreign workers.

TOKYO -- As the Japanese labor force continues to shrink, companies are increasingly counting on foreigners to fill the gap, especially in such short-staffed businesses as construction and security.

"We face a severe labor shortage on the ground, and we urgently need to bring in foreign workers," said Koji Takayanagi, president of convenience store operator FamilyMart Uny Holdings.

More than 1.08 million foreigners worked in Japan as of October 2016, up 400,000 from the same month of 2012, according to the Ministry of Health, Labor and Welfare. More than 30%, or 360,000, worked for small businesses of fewer than 30 people.

The percentage of foreigners in Japan's workforce also increased from 1.1% to 1.7% over the period. While they are playing a bigger role across industry lines, they are especially visible in manual-labor jobs many Japanese avoid. They made up 3.7% of workers in such fields as waste disposal and security services, roughly double the figure from October 2012, and more than 3% in hospitality, food service and manufacturing.

The manufacturing sector gained a total of 90,000 workers in those four years, 77,000, or almost 90%, of whom were foreign. Nearly 70,000, or 67%, of new workers in wholesale and retail came from abroad. A logistics sector struggling to keep up with the growth of e-commerce also gained many foreign workers as well.

The construction sector, meanwhile, lost a total of 170,000 workers even after gaining 28,000 foreigners. Lifestyle services, like linen supply, and entertainment saw a similar pattern as well.

Ryutaro Kono of BNP Paribas Securities (Japan) estimates that there are up to 210,000 more foreign workers in Japan who are here illegally or are otherwise not reflected in the government data. He said the influx of cheap labor could push down Japanese wages.

But Kono also stresses the potential economic benefits. For every year Japan gains 100,000 foreign workers, gross domestic product will also grow 0.07%, he said. Based on Kono's calculation, GDP will rise an extra 1% if current trends continue until 2030.

The increase in foreign workers seems inevitable. Japanese men aged 15 to 64 in the labor force decreased by 3.97 million between 2000 and 2016. Meanwhile, 2.93 million seniors and 100,000 women aged 15 to 64 newly entered the labor force, offsetting almost 80% of the drop.

But Japan is expected to lose another 2.7 million workers aged 15 and up by 2025, according to the National Institute of Population and Social Security Research. At some point, seniors and women will not be able to make up for the shortfall.

The country will face a shortage of more than 1.5 million workers in health and nursing care alone, resulting in 6 trillion yen ($54 billion) in economic losses, according to Takuya Hoshino of the Dai-ichi Life Research Institute.

A number of obstacles still hamper foreign workers, particularly when it comes to technical interns and students. The number of foreign interns has jumped 60% in four years to about 210,000 as of autumn 2016. But, for example, a company employing more than 300 full-timers and participating in the government's intern-training program for the first time can fill just 5% of its positions with such interns. Many businesses also take advantage of vague requirements on what counts as training, making interns work long hours in subpar conditions for low pay.

Foreign students can work part-time for up to 28 hours a week, and many take shifts in convenience stores and other retailers. Some do land jobs in Japan after graduating, but mainly in specialized positions or for Japanese companies looking to expand abroad. Japanese businesses have been pushing the government to allow more moderately skilled foreigners to find work here.

Strict regulations have been imposed on foreign labor, except in such highly specialized areas as business management and research. The government is already working to widen the window for agriculture and other seriously short-handed areas but needs to look to further options based on conditions on the ground.

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