I have recently returned from Japan where we held the Future of Work Research Consortium’s first live event in Japan. During the course of my visit, I found myself thinking more and more about how Japan will cope with the dual conundrum of an ageing population and a rapidly shrinking workforce.
During a previous visit to Japan, I was struck by the challenges facing Japanese Youth and the behaviours they will need to adopt to remain competitive in our increasingly global talent pool. This time round, as I spoke to some of the country’s leading organisations including FoW members, Fast Retailing, Kokuyo and Ricoh, I became more fascinated by the organisational response to Japan’s demographic dilemma. To give you an idea of the magnitude of the challenge facing Japan, 22% of the population is 65 or older, and this will increase to 40% by 2060. This increasing number of older people will be supported by a shrinking population of workers, owing to Japan’s birth rate of just 1.39 children, one of the lowest in the world.
For organisations, this context will present two key challenges. First, the war for young, talented workers will become increasingly fierce. Companies wishing to succeed in this war for talent will need to consider how they support younger workers who will likely be caring for elderly parents and grandparents as well as starting their own young families.
Second, organisations will need to develop models that help older workers remain in the workforce. Japanese companies already outperform their peers on this front, but will need to consider whether their policies and practices will continue to work when older people significantly outnumber younger colleagues. How will career models have to change so that they are not faced with the increasing wage costs associated with older, senior staff? Part of the solution will come from rethinking linear career paths that see pay increase in line with age and considering more lateral models in which people can dial up and dial down their commitments and pay over long working lives.
From the discussions I had during my trip, and my own research in this area, it seems there are three tools Japan has to relieve the demographic tensions it faces:
1. Involving Women
One way to ease the tension around a shrinking workforce is to be more innovative about where you seek out talent. For Japanese corporations, the challenge is to increase the number of women in all ranks of its organisations. With just 48% of women in the workforce, this remains an area of untapped talent within Japan. Indeed, some of the savviest Western multinationals such as AMEX and Unilever have taken advantage of this situation and recruited many of Japan’s female stars. The issue around women’s participation is very much a cultural and behavioural one, requiring the breaking of conventions such as women leaving the workforce as soon as they marry or have children. Attracting women will require a concerted effort from Japanese corporations, perhaps reaching out to young women as they begin forming their aspirations in their late teens and early twenties, and demonstrating that there are opportunities for female leaders.
2. Globalising Japan
One of the observations I made during my previous trip to Japan was that the students I met at Tokyo University did not speak English. This was in marked contrast to the experience I had at Chinese and Indian universities in which the appetite for learning English is insatiable. To take advantage of a global talent pool, and to expand operations abroad, Japanese students must equip themselves with the international business language which, for now at least, is English.
3. Opening the Borders
Perhaps the most contentious issue, but also the most promising way out of the demographic dilemma, is immigration. Currently, less than 2% of Japan’s population is non-native and the government’s approach to immigration has been generally conservative. Prime Minister Shinzo Abe has eased restrictions on some categories of immigration in recent months, but these reforms will need to go much further if they are to make a substantial difference to workforce dynamics.
What became clear to me during my time in Japan was that there is a great deal of promise in this fascinating country. Japan has a unique culture in which age-old tradition sits side-by-side with groundbreaking technology. It is home to some of the world’s oldest and most successful companies and holds a reputation around the globe as a producer of the highest quality technologies.
I believe that the demographic challenges facing Japan are by no means insurmountable and the appetite for change demonstrated by the wonderful people I met during my stay suggests they are at an important turning point. With ageing populations a worldwide phenomenon, Japan has an opportunity to be at the leading edge when it comes to catering for the needs of citizens who may live to be 100 – with the potential to provide case studies and establish best practice that other countries will follow. In this area in particular Japan’s next moves will be the subject of great interest – and the world will be watching.