(The following excerpt from Allegis Group’s latest research report, “Global Workforce Trends 2018,” focuses on conditions in Japan, demonstrating the strategic priorities that leading companies face to stay ahead amid talent supply and demand challenges.)
In Japan, the economy is struggling with anemic gross domestic product (GDP) growth and several quarters of actual declines in the past several years. Usually, sluggish GDP growth coincides with increasing unemployment. With both low unemployment and low productivity, however, economic data indicates that the country may need more workers to strengthen the economy. Japan’s aging population has been a high-profile story for several years, but in early 2018, the pace of demographic change has accelerated, with the Financial Times reporting that deaths outnumbering births by an average of 1,000 per day.
The unemployment rate is the lowest in more than 10 years and continued to decline over the past year. Steady and robust job creation in highly skilled industries is fueling a large portion of new job growth. Professional and technical services, the largest consumer of IT skill sets, added 20,000 jobs from 2016 to 2017, signaling strong competition in the market. Top hiring companies in a 2017 review included Amazon (491 postings), PricewaterhouseCoopers (328 postings), and KDDI (229 postings).
With such an urgent talent shortage, Japan is now beginning to see rises in wages. In the 2017 to 2018 period, the country saw wages rise by 2.4 percent, with monthly pay marking the highest climbs since 1998. In real terms, however, the actual cost of wages have not kept up with rising food and oil prices, so the trend toward higher labor costs will likely continue.
Rising wages in Japan usually are driven by manufacturers, but non-manufacturers have taken the lead this year for the first time since 1997, increasing pay by 2.8 percent — their biggest hike in 21 years. Logistics providers and service industry players, in particular, are working harder to attract employees. The logistics sector enacted an average pay raise of 3.4 percent, the highest across all industries. The industry is struggling to keep pace with the surge in demand for e-commerce shipments.
Retail and manufacturing industries are also seeing rising wages in Japan. Department stores and supermarkets raised wages by 2.5 percent. Manufacturers boosted pay by an average of 2.3 percent, but Toyota Motor, which likely posted a record net profit for the fiscal year ending in March, has agreed to a 3.3 percent pay raise. Many big electronics makers such as Hitachi and Panasonic are offering just 1,500 yen more in base pay this year. Sony, which is not part of industrywide negotiations with unions, decided on a five percent increase in yearly pay as the company hopes to attract experts in artificial intelligence (AI) and other technologies to boost its competitiveness.
These trends toward higher wages reflect strong demand for skills by employers across all industries in Japan. Many companies are switching from a seniority-based wage structure and raising starting salaries. Competition for workers is particularly fierce in the technology sector. Job postings for data scientists have quadrupled over one year. Companies from China and elsewhere also are luring Japanese graduates away with generous offers. Some companies are focusing on seniors to overcome labor shortages. West Japan Railway and farm equipment maker Kubota are including post-retirement hires 60 and older in their pay increases. Honda Motor pushed back its retirement age last year and raised pay for senior employees.
For more perspectives on the changing workforce, download your copy of “Global Workforce Trends 2018” today. Based on more than three decades of experience, extensive research, and a survey of nearly 700 global talent acquisition stakeholders, the report provides:
You can also catch up on research around additional topics in the global talent, staffing, and recruitment services space by checking out reports on issues ranging from recruiting and retaining Millennial and Gen Z talent and how diversity and inclusion (D&I) strategies can drive business success to artificial intelligence and the future of work.