That Japan is in the grips of a skills shortage crisis is not news. In the 2016 Hays Global Skills Index, Japan received a rating of 9.8 for talent mismatch. In 2017 that rose to 9.9. In July of that year, the Financial Times reported on labour shortages reaching new levels of severity, with the ratio of open jobs to applicants hitting a 43-year high of 1.51 per cent. By February of this year that figure had risen to 1.59.
Though it is no longer news, the shortage continues to be a major concern. The economy is showing steady growth, but to continue to do so it needs output to be generated, and with 70 per cent of companies suffering from labour shortages according to a Finance Ministry survey, this is going to be a challenge. One approach that the government is touting to tackle the problem is to turn to the country’s massed ranks of part time and contract staff. This solution, however, is not without its own difficulties.
In Japan, contract work has an image problem, one of low paid office clerks, hospitality staff and call centre workers on ‘haken’ contracts that afford them few rights and, often, even less respect. However, looking beyond these stereotypes there is a rising trend for highly-skilled staff in the upper levels of industry choosing contracting as a career path, filling gaps that permanent staff cannot. This is particularly apparent in IT contracting.
With the government actively encouraging the coming AI and robotics technological revolution, and financial institutes very much open to the changes that this will likely bring, Japan’s IT sector is currently very much in the global spotlight due to developments in these fields. As this area is of such prominence, there is a need for candidates who can fill positions in the booming sectors of machine learning, big data - where the government is certifying providers to drive further innovation - and blockchain, a technology that Japan has taken to a surprising degree.
Within the IT contracting market, the major roles that require filling are in project change management; particularly business analysts and project reengineering specialists. Also, thanks to the relative newness of the technology involved, candidate positions in technology audit and governance are needed as are roles in development, networking infrastructure, and network engineering. Furthermore, due to the recent rash of M&A activity in the financial services sector, and the high IT adoption levels in the industry, candidates with experience in these areas are in demand.
Due to the global spotlight on Japan’s IT industry, many international companies are developing their presence here, and Hays is being tasked with filling positions within them. One major skill that companies are looking for in these candidates right across the IT contracting sector is English proficiency.
According to the 2017 EF English Proficiency Index, the English level of Japanese was ranked 37th out of 80 countries surveyed, a trend that is deteriorating. This is manifesting itself in a major skills shortage across the country, a situation exacerbated when extrapolated to the technology sector, where vocabulary skills are increasingly specific, making the finding of appropriate candidates even more difficult.
And yet for those adequately proficient in English, often their lack of foreign experience or their rigid adherence to the Japanese business culture of age-defined seniority, can see candidates struggle in these MNCs where more relaxed working practices are the norm. This means that candidates who are not only highly skilled are sought after, but also those who are flexible and culturally adaptable.
With such a wide array of IT contracting positions to be filled, companies are struggling to keep up, and they are finding that their intake of permanent employees is falling short of the skills required.
One reason behind this deficiency lies in the business culture propensity towards moving employees from department to department. Of course, building in-depth organisational knowledge has its many advantages, but when specific, well-honed skills are required, companies are finding that the generalists they have developed are coming up short. Though some universities are attempting to redress this issue and some of the more modernised companies such as Rakuten have changed their employment models, for most part organisations must look to other options, particularly in upper levels of IT contracting hires.
Although contracting may seem like an obvious solution, one of the major issues standing in the way of its success is the poor impression that Japan has of contractors. Unlike in the U.S. or Europe where there is a healthy contracting industry, in Japan companies and candidates alike find it difficult to separate the notion of contractors from the aforementioned low-paid, dispensable workers. Fortunately, this is a perception that is slowly changing.
Thanks to the Hays IT contracting team, IT Solutions, holding seminars and networking events aimed at improving the opinion of candidates towards contracting, there is a growing number of candidates with a depth of experience entering the market.
Following on from this, over the last 12 months companies – particularly in the financial services and higher technology vendor sectors – are waking up to the idea that there are many senior-level, highly-skilled contracting candidates in IT that are able to quickly and successfully fill skills-short positions. As such they are realising that these candidates, who are in high demand and better skilled than their permanent staff, should be compensated accordingly, which gives contracting roles an even higher esteem in the eyes of candidates.
For those individuals with the skills and adaptability required, there are many advantages to contracting in the IT sector. Perhaps the primary reason for candidates to take up contracting roles is in order to make mid-career changes and to gain experience in new disciplines. As many contracting roles do not require the candidate to be a 100 per cent fit – as long as they are flexible enough to adapt they may be lacking in other areas – it gives them an opportunity to attain and develop new skills along with gaining product knowledge.
It may also be that candidates, for one reason or another, find themselves no longer in permanent positions and are seeking a way back into the market, or they are career contractors who enjoy the flexibility and work/life balance that contracting affords, while still being eligible for health insurance, paid leave and the potential for raises on longer term contracts.
Whatever their reasoning, as the perceptions surrounding contracting begin to improve on both candidate and employer sides, there is little doubt that it can be a mutually beneficial situation. And as long as the skills shortage continues to widen across Japan, and as the IT contracting sector continues to grow, contracting, particularly in the higher end of the recruitment market, may be the solution to the shortage question that over the past few years has been increasingly difficult to answer.
Now that would be news.
If you would like to discuss this report in more depth or you wish to discuss your job search or recruitment needs, please email Michael Craven, Business Director for Hays Japan at [email protected]
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For further information please contact Yuki Noro, Public Relations of Hays in Japan on +81 (0) 3 3560 1529 or [email protected]
About Hays
Hays plc (the "Group") is a leading global professional recruiting group and is celebrating its 50th anniversary this year. The Group is the expert at recruiting qualified, professional and skilled people worldwide, being the market leader in the UK and Asia Pacific and one of the market leaders in Continental Europe and Latin America. The Group operates across the private and public sectors, dealing in permanent positions, contract roles and temporary assignments. As at 31 December 2017 the Group employed 10,800 staff operating from 256 offices in 33 markets across 20 specialisms. For the year ended 30 June 2017:
– the Group reported net fees of £954.6 million and operating profit (pre-exceptional items) of £211.5 million;
– the Group placed around 70,000 candidates into permanent jobs and around 240,000 people into temporary assignments;
– 24% of Group net fees were generated in Asia Pacific, 49% in Continental Europe & RoW (CERoW) and 27% in the United Kingdom & Ireland;
– the temporary placement business represented 59% of net fees and the permanent placement business represented 41% of net fees;
– Hays operates in the following markets: Australia, Austria, Belgium, Brazil, Canada, Colombia, Chile, the Czech Republic, Denmark, France, Germany, Hong Kong, Hungary, India, Ireland, Italy, Japan, Luxembourg, Mainland China, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Portugal, Russia, Singapore, Spain, Sweden, Switzerland, UAE, the UK and the USA