TOKYO -- Japanese employers and employees will have to work together to improve workers' skills or risk being left behind by the digital revolution, according to the upcoming Annual Report on the Japanese Economy and Public Finance 2018.

Japan's Cabinet Office is finalizing the report and could release it this month.

A draft of the report seen by Nikkei stresses the impact that the digital revolution is having on Japan's labor force. Saying further economic growth rests on workers becoming more digitally literate, it calls on businesses to amp up their investments in their employees. Doing so, it says, will lead to higher labor productivity. 

According to an estimate in the draft, Japanese businesses spend an average of 280,000 yen ($2,536) or so a year on each employee for in-house and outside training and seminars. For listed companies, the amount goes up to 360,000 yen.

The yen figures include direct spending on training and seminars plus wages equivalent to the hours employees spend at these sessions.

The draft says a 1% increase in talent development spending would raise labor productivity 0.6% and that improved skills would add to a company's value.

In addition, supporting employees' self-development efforts would lift a company's productivity another 0.68%, the draft says.

The report goes on to state that an employee who makes self-development efforts would be able to increase his or her annual salary by an extra 99,000 yen in two years' time, compared to an employee who makes no such efforts. The figure reaches 157,000 yen after three years. Self-development efforts also increase the probability of a job-seeker finding employment by 10 percentage points, according to the draft.

The motivating factor behind the report's calls for skills training is the rapid advancement of digital technologies and the skyrocketing demand for engineers who can deliver them.

The skills that these engineers possess are unlikely to be automated.

Employees at this foreign exchange trading company already look like they are being swamped by technology. A Japanese government report is about to warn them of the need for further training.   © Reuters

Japan is especially bereft of information technology specialists, who account for 1.8% of the nation's labor force. This compares to 5.2% in the U.K. and 3% in the U.S. In Japan, about 70% of these specialists are employed by tech companies. Overseas, the rate is in the range of 30% to 50%. 

Experts say the jobs of workers without adequate digital literacy are susceptible to automation, be it in the form of artificial intelligence or robots. The Organization for Economic Cooperation and Development says the proportion of routine types of jobs -- like clerical work, basic paralegal work and reporting -- in Japan is higher than in other economies.

According to one study, Japan is behind the U.S. and Germany in terms of digital literacy among the elderly; fewer old people in Japan can solve problems by exercising their information technology skills.

The Cabinet Office report warns that if jobs are lost to automation, Japan's labor share of income would suffer. In other words, wages and other worker earnings would make up less of the national income.

When equipment and facilities costs fall and businesses find themselves with extra cash, they do not typically share it with workers. This trend has already taken hold in Japan, and the resultant lack of sufficient pay raises is negatively affecting consumption and hampering sustained economic growth.

The draft stresses the importance of the workforce being capable of supplementing new technologies -- and not being replaced by technology.

Businesses cannot ensure this on their own; employees have to be willing to make the most of opportunities and improve their skills.