• Wage pressure in high-skill occupations is the biggest contributor to Japan’s
• Growth in Japan’s participation rate has slowed this year, potentially putting pressure on firms seeking to expand
• The issue of the country’s ageing population presses on in the face of short labour supply
The biggest contributor to Japan’s tightening labour market is a widening occupational wage gap, a result of faster wage growth in some high-skill occupations, according to the seventh edition of the Hays Global Skills Index (‘the Index’), a report published by recruitment experts Hays in conjunction with Oxford Economics.
This year’s report – titled ‘Investing in the Skills of Tomorrow; Avoiding a Spiralling Skills Crisis’ – examines professional employment markets across 33 countries and markets and measures the ability of companies to access skilled workers, providing a unique insight into the health of the global labour market.
In Japan, the Overall Index score stands at 5.9, suggesting that its labour market continues to be pressured in the last year. The Overall Index score is an aggregate of the seven key indicators which were chosen to highlight supply-side issues, demand-side issues, or both supply- and demand-side issues relating to the hiring of skilled workers.
Despite the underlying shortage of talent for high-skilled occupations, wages have not risen markedly ignoring pressure from the Government and Bank of Japan. The lower score compared to previous years in this respect indicates that wages for those in high-skill industries are rising more slowly or in line with wages in low-skill industries. Hays experts have identified that shortages are prevalent in IT strategy/ implementation and BI & AI data analyst/ engineering roles, which are high in demand.
Declining labour market participation is a key issue in Japan that is contributing to a worsening skills gap. The lower score compared to previous years in this respect indicates the smaller pool of workers available. This is coupled with the longer-term issue of an ageing population in Japan, which will likely become a limiting factor for labour supply, with the working-age population projected to decline by 0.7 per cent over the coming decade.
Across Asia*, general participation rates have been driven up by improvements in education levels and other socioeconomic factors. This year, however, a slowdown in the growth of labour market participation rates across various age groups has been a major driver of the region’s higher score. Businesses are therefore struggling to find the right talent and continue to suffer from low productivity levels. This particularly resonates with Japan’s current employment market, which has the highest Overall Index score in the region.
Commenting on the findings of the Index, Marc Burrage, Managing Director at Hays Japan said:
“The Index provides us with invaluable information about labour markets and whether the global workforce is equipped with the skills required to flourish in the rapidly developing world of work. This year’s Index has revealed many issues currently in the labour market globally, such as the growing talent mismatch, widespread productivity puzzle, ageing population and gender pay gaps.
“The Asia Pacific Overall Index score, which remained at 4.6 between 2017 and 2018, reflects the global lack of growth in productivity and wages. Labour productivity in the region has flatlined in the face of an ageing population.”
“In order to prepare for an ageing workforce, policy makers will need to focus on improving the employability of workers at an older age by facilitating the training necessary to update their skills. While greater international migration would help boost labour supply and address the ageing workforce in some countries, some argue that migrants can only play a temporary role given they too will inevitably age. Finding other ways to boost productivity will be critical to offset the impact of an ageing population.”
*In Asian countries/ regions in which Hays operates: Mainland China, Hong Kong, Malaysia, Japan and Singapore
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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 30 June 2017 the Group employed 10,000 staff operating from 250 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, Mainland China, the Czech Republic, Denmark, France, Germany, Hong Kong, Hungary, India, Ireland, Italy, Japan, Luxembourg, Malaysia, Mexico, the Netherlands, New Zealand, Poland, Portugal, Russia, Singapore, Spain, Sweden, Switzerland, UAE, the UK and the USA.
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