Looking overseas to solve Japan’s labor shortage

Misa Matsuzaki, CEO of WORK JAPAN Co., Ltd, speaking at G1 Global Conference 2019

First published by The Japan Times

Entrepreneur Misa Matsuzaki likes a good business challenge. The youngest female entrepreneur to publicly list a company on the Tokyo Stock Exchange aims to solve Japan’s labor shortfall through increased migration.

Firms struggle to fill vacant jobs due to a chronic labor shortage caused by the nation’s shrinking working-age population. There are 1.5 vacancies for every job applicant. The labor pinch will only intensify as the working population plummets in future years.

By 2030, 6.4 million workers in mainly blue-collar sectors, equal to nearly 10 percent of the working population, will exit the workforce. The government hopes to fill the gap with women and the elderly. But are they ready to do blue-collar jobs?

“If we lose 6.4 million blue-collar workers by 2030, then the only choice for employers is to hire foreigners — even if they must pay them a high wage,” Matsuzaki says. “Otherwise, we will have to accept many small companies disappearing.”

In 2014, Matsuzaki started People Worldwide Co., a cross-border recruiting company that helps Japanese employers recruit overseas trainees under the government’s Technical Intern Training Program. The program was launched in 1993 with intentions to improve the skills of people from developing nations.

In practice, trainees provide employers with a cheap source of labor. By law, interns can come to Japan to work for up to five years. But they cannot bring their families or change jobs. When their training ends, they must return to their home country.

Once in Japan, trainees are captive to employers, some of whom force them to work illegal overtime. Employers can deduct inappropriate expenses from pay, causing interns to accrue debts. When the abuse became public, Matzusaki ceased taking new orders.

She discussed her concerns with her friend Kanae Doi, the Japan representative of Human Rights Watch, a global organization that investigates and reports human rights violations. Together, they asked then-Foreign Minister Taro Kono what they could do to stop the trainee program abuse. Kono was moved by the humanitarian crisis occurring in his own country. He formed a six-person public-sector advisory team in which Matsuzaki and Doi now serve.

Re-energized, Matsuzaki launched a new company, Work Japan Co., in July 2017. The firm makes a match-making app that connects migrants and employers (neither are involved with the trainee program).

In April, an amendment to the immigration control law took effect to introduce a new visa program. Under the legislation, visas are issued to non-Japanese seeking work across 14 sectors suffering from manpower shortages. The government created a new visa category, available only to those passing an advanced skills test, allowing migrants to switch jobs, bring their families to Japan and eventually become permanent residents.

Alas, the trainee program remains unchanged.

The government expects the new visa policy to attract up to 345,150 workers to Japan by 2024. Since April, however, only 616 people have obtained the advanced skilled status. Such anemic numbers will not solve Japan’s long-term labor shortfall. By one expert’s estimate, Japan’s workforce will decline 40 percent from 75 million to 45 million by 2050.

Mitsuhiro Fukao, an economist at Musashino University, thinks Japan needs 200,000 to 400,000 new immigrants each year to stabilize its population. The country needs 10 million foreign workers by 2050, according to Haruo Shimada, president of Shimada Research Institute and a former Cabinet Office adviser. There were 1.46 million foreign workers in Japan as of October last year. “We have to fill up,” says Shimada. “We have to adjust.”

Over 100,000 registered foreign users have downloaded Matzusaki’s Work Japan app. Yet few employers have so far used her platform to hire non-Japanese.

The problem is not a lack of migrants wishing to work in Japan. Blue-collar workers migrate, even temporarily, to wherever wages are highest. They are drawn by this country’s comparatively high minimum wage.

Employers are put off by the high cost of hiring non-Japanese. Legally, companies must pay them the same wages they give Japanese workers. After paying insurance, pension, training, overseas flights, dormitory and recruitment expenses, it is often cheaper to hire a nonregular Japanese worker than a foreign citizen, Matzusaki notes. This is especially true if non-Japanese switch jobs within one year.

Firms also prefer to hire Japanese workers over non-Japanese who look and act differently. “In Japan, there is no employer who thinks of hiring foreigners when they need to hire someone,” she laments.

This should change over time. “Employers know there’s a demographic-led labor shortage,” says Matsuzaki. “It’s like the proverbial frog in boiling water. It’s getting harder and harder to find new Japanese hires, but they feel that next month the situation will improve.”

Japan is running out of time. In 10 years the working population of other Asian nations will start to shrink. Where will migrants come from when competition for Asian workers heats up?

Matsuzaki may have an answer. The entrepreneur spent her childhood in South Africa when her father worked there for a Japanese trading company during the 1970s. South Africa opened her mind to the idea of working with culturally diverse people.

In 1997, when she was 26, Matsuzaki started exporting Japanese second-hand cars to the developing world. Then, the used car business had a poor reputation. Only the yakuza bought and sold second-hand cars, people thought. Yet she managed to grow and list her firm, Agasta Co., on the TSE Mothers market in 2004.

Now through Work Japan she’s looking farther afield to solve Japan’s labor shortfall. “I’m a business person who clicks with businesses which people think are untouchable,” she admits.

“Maybe it’s OK to hire people who have different color skin? I think it’s the only way for businesses to survive long term,” she suggests.

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