Comment: The shifting sands of labour

Although the demand for labour in advanced economies is facing a longer-term decline there are significant shorter-term labour shortages in some countries, often due to demographic trends and a reluctance to expand by setting up operations abroad. However, in Japan there are additional factors contributing to the tight labour market.

Japan has embraced globalization in recent decades, but managements remain reluctant to decentralize control to operational centres outside the country. There also remains a strong cultural commitment to lifetime employment and against women working on a full-time basis or gaining equal opportunities allowing them to move into managerial positions – which limits flexibility and ROI on human capital. As a consequence the Japanese government has had to reluctantly accept an influx of foreign skilled labour which now amounts to over one million workers.

The incessant need to build in order to relieve overcrowding has led Japan to have its most severe shortages in the construction sector. Last Autumn only 12% of steel construction jobs could be manned by available skilled workers and hence the demand for foreign workers was intense. Japan’s complex immigration laws only allowed this situation to be slowly eased. Even so, the construction sector saw a 41% rise in foreign workers over the year.

The majority of foreign workers entering Japan are on short-term work visas and immigration is still so much a political hot potato that even the term “immigration” is seldom used in official documents. There is also no category under existing immigration laws to admit unskilled workers, so an existing category of “training visas” first established to help developing countries improve their skill base is serving to fill many jobs nationals refuse to undertake.

The demand for those with the greatest talents is now operating on a truly global scale, but shortages are appearing at all levels in geographical pockets and for widely differing reasons. For instance, in sub-Saharan Africa the secondary school enrolment rate is still only 40%, and just 7% of students continue to tertiary education. Therefore new enterprises and foreign investors are clamoring for talent in a small skilled labour pool. In the USA too, the crackdown on illegal workers, new immigration controls and a policy of reshoring production are being introduced when the unemployment rate is below 5%. This means that many ,particularly smaller, companies will be forced out of business because they cannot find the right calibre of people to operate their business.

There is a quote ascribed to Milton Friedman which goes some thing like this “If the government took over the Sahara desert then there would be a shortage of sand for five years”. As youth employment soars and women continue to hit the glass ceiling governments persist in the application immigration policies that respond to the popular dislike for foreigners rather than the demands of their economies. Employers and governments alike need to take a long look at both the near and longer-term and get back to old fashioned manpower planning.

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