This report analyses the Japanese market.
1. it was not just the decline in the working age population.
Recently, the most talked-about causes of labour shortages have been the retirement of the baby boomers and the decline in the working-age population (the working population aged 15 to 64).
Figure 1 below is a well-known relationship chart showing the total population, the working-age population, the young population (aged 14 and under) and the elderly population (aged 65 and over).
As can be clearly seen from this, the total population of Japan today has hardly declined from its peak.
The working-age population, however, has declined significantly by 15% in the 24 years from its peak in 1995 to 2019. This significant decline in the working-age population has been said to be the most significant cause of the labour shortage.
2. the working-age population has declined significantly from its peak, but the working population has changed little in that period
| Total population | A Working age population | B working population | Number of companies | Medical care Welfare Workers | |||||
|---|---|---|---|---|---|---|---|---|---|
| Unit | Thousands | Thousands | Ratio | Minus | Thousands | B/A | Ten Thousand | Thousands | Counterpart 2002 Increase |
| 1995 | 125,570 | 87,160 | 100.0% | 0 | 67,210 | 77.1% | |||
| 1996 | 125,859 | 67,280 | 6,503 | ||||||
| 1997 | 126,157 | 67,770 | |||||||
| 1998 | 126,472 | 66,990 | |||||||
| 1999 | 126,667 | 66,090 | 6,185 | ||||||
| 2000 | 126,926 | 86,220 | 98.9% | -940 | 65,610 | 76.1% | |||
| 2001 | 127,316 | 65,370 | 6,119 | ||||||
| 2002 | 127,486 | 64,610 | 4,300 | 0 | |||||
| 2003 | 127,694 | 64,640 | |||||||
| 2004 | 127,787 | 65,010 | 5,710 | ||||||
| 2005 | 127,768 | 84,090 | 96.5% | -3,070 | 65,480 | 77.9% | |||
| 2006 | 127,901 | 65,800 | 5,703 | ||||||
| 2007 | 128,033 | 66,080 | |||||||
| 2008 | 128,084 | 64,090 | 6,000 | 1,700 | |||||
| 2009 | 128,032 | 63,140 | 5,854 | 6,230 | 1,930 | ||||
| 2010 | 128,057 | 81,735 | 93.8% | -5,425 | 62,980 | 77.1% | 6,560 | 2,260 | |
| 2011 | 127,753 | 81,303 | 93.3% | -5,857 | 62,930 | 77.4% | 6,780 | 2,480 | |
| 2012 | 127,498 | 80,173 | 92.0% | -6,987 | 62,800 | 78.3% | 5,423 | 7,080 | 2,780 |
| 2013 | 127,247 | 78,996 | 90.6% | -8,164 | 63,260 | 80.1% | 7,380 | 3,080 | |
| 2014 | 126,949 | 77,803 | 89.3% | -9,357 | 63,710 | 81.9% | 5,509 | 7,600 | 3,300 |
| 2015 | 126,597 | 76,818 | 88.1% | -10,342 | 64,010 | 83.3% | 7,880 | 3,580 | |
| 2016 | 126,193 | 75,979 | 87.2% | -11,181 | 64,650 | 85.1% | 8,110 | 3,810 | |
| 2017 | 125,739 | 75,245 | 86.3% | -11,915 | 65,300 | 86.8% | 8,140 | 3,840 | |
| 2018 | 125,236 | 74,584 | 85.6% | -12,576 | 66,640 | 89.3% | 8,310 | 4,010 | |
| 2019 | 124,689 | 74,011 | 84.9% | -13,149 | 67,973 | 91.8% | |||
What is clear from the above is that the working-age population has decreased by some 13 million people in 24 years, while the employed population has remained virtually unchanged over this period. The increase in total employment can be attributed to the increase in employment of women and older people aged 65 and over (i.e. an increase in the labour participation rate). At the same time, the number of health and welfare workers (e.g. care workers) has increased by 4 million in the 16 years since 2002.
At the same time, another major cause of the labour shortage is the significant increase in home delivery services.
3.The most important cause of the labour shortage is that a lot of manpower is taken up by low value-added care, medical care, transport, etc
A major cause of the labour shortage is that, as mentioned above, Japan today is not export-led as it was before Lehman Brothers, but rather labour-intensive and domestic demand-led, such as consumer spending and public investment.
Government consumption includes public services such as schools and the police, as well as medical care and long-term care, which are areas where demand is expected to grow as the population ages.
Since 2002, the number of people employed in the health and social care sector has jumped by 3.18 million, from 4.3 million (January 2002, when current data is available backdated) to 7.48 million (February 2017). The demand-side factor is the increase in the number of (essential but) low value-added occupations, which has absorbed employment in the sector.
Overall employment increased by 4.51 million over the same period, but health and social care accounted for 70.5% of the increase, which is a major factor in the labour shortage.
4. the number of young people has decreased by 30% over the past 20 years
The decline in the population is due to the falling birth rate and the ageing of the population, which has been going on for quite some time, so even though the total population has remained unchanged, the composition of the population has changed significantly.
Comparing 1997 and 2017, the young population aged 15 and over and under 30 has decreased by approximately 32%.
On the other hand, the elderly population aged 65 and over has increased by 79%.
Since the total population has not changed much during this period, aggregate demand in the economy as a whole has also changed little.
(Consumption by older people is down compared to their working age, but spending on basic food, clothing and housing usually does not change much).
The natural consequence of this is a growing shortage of labour, since demand remains unchanged but fewer people are available to work on the provision of products and services to meet it.
In particular, labour shortages have become apparent in industries that require a lot of young employees, such as food service and retail, because the decline in the young population has been so drastic.
In areas of labour shortage, there is a polarisation towards relatively high value-added professional and technical occupations and interpersonal service occupations (including care-related occupations) and transport and machine driving operations, as well as on-site work such as driving and construction.
In a survey on responses to labour shortages and other issues published by the JCCI on 3 July 2017, the accommodation and catering industry was the sector with the highest number of respondents stating that they were short of staff.
This was followed by the transport, care/nursing and construction industries.
5. the reality of intense labour shortages in the food and beverage business
The next 20 years will mark the beginning of a process that will eliminate many small, medium and micro businesses in Japan.
Manpower shortages are concentrated in smaller rather than larger enterprises.
It is important not to take this lightly, as the labour shortage is the one that is responsible for the elimination of unproductive and weak businesses. Not only is a shortage of staff only a negative for existing food and beverage businesses, it is the most important factor affecting the survival of a business.
The current situation happening in the food and beverage and noodle businesses as a result of the labour shortage is as follows.
1. no applications, no matter how many applications are received
Competition in the recruitment market for both full-time, part-time and part-time jobs is tough, and udon noodle and ramen shops are unattractive businesses for workers. So even if they advertise for jobs, they receive few, if any, applications, and even if they do, they receive people who are far from the level of employment.
Even if these people are hired, they will not be able to keep up with the rigours of the working environment unique to the noodle business and will soon quit.
If they do quit, there is no need to be patient and not quit, as they can quickly find other jobs due to the current labour shortage market. There is no one with the professionalism to “persevere, become a professional and pursue your path.”
2. restaurant work is demanding, but wages are low and it is not possible to recruit good people
When there are more jobs and a shortage of labour, wages generally rise. However, “real wages”, which take into account the rate of price increases as published by the Ministry of Health, Labour and Welfare, peaked around 1996 and have been on a downward trend ever since.
This is a major challenge for Japan, which is the only developed country in the world to face this problem. Wages in Japan have barely risen in the past 25 years.
One possible reason is the increase in the number of non-regular employees.
(According to data from the Ministry of Health, Labour and Welfare, the number of non-regular workers has been slowly increasing since 1994.)
Normally, companies would be better off employing permanent employees, raising wages and switching non-regular workers to permanent employment. However, at present the number of permanent employees is not increasing.
This is a problem for both the companies and the workers, and an increasing number of workers would prefer to be employed on a non-regular basis rather than working as regular employees.
Even though there is a continuing labour shortage, many companies and shops are still recruiting under the same conditions as before and not increasing wages.
For example, if the average hourly wage for part-time workers in Tokyo these days is 1,000 yen, the chances of recruiting a good person at 1,000 yen are very low. However, if the hourly wage were to be raised to 2,000 yen, it would be possible to secure highly qualified staff, and the labour shortage could be resolved at once.
However, the situation on the company and shop side is that productivity (sales) is not increasing, so there is a difficult situation where salaries cannot be increased.
It is natural that unattractive jobs with low wages and no increase in pay will attract fewer applicants and lower the quality of applicants.
3. low levels of employees
The industry as a whole pays low wages, so it becomes a vicious circle where only low-level applicants who would not be employed in other industries apply. This results in a low level of each employee, and although there are a number of employees, the skills per employee are low. As a result, there is a shortage of staff.
A shop with a high level of employees who work in a fast-paced environment does not suffer from staff shortages even if it does not have a large number of employees.
This is caused by problems of treatment, including wages, the working environment and the internal culture and training within the organisation. Another reason is that the employees do not share the same values and skills because they did not take the time to receive training and guidance.
4. the essential challenges of the food and drink business and the noodle business
Most food and noodle businesses in Japan cater to businessmen. As a result, there is a very high concentration on lunch, with many employees being deployed for the lunch hour and no people needed during idle hours.
This makes it very difficult to organise shifts, inevitably resulting in overwork during the lunch hour and overstaffing during idle times.
In short, the necessary number of staff cannot be placed firmly during the busiest hours, and many staff are working during the relatively spare hours, a situation that results in a loss of labour costs.
Noodle businesses such as udon noodle and ramen shops operate in this way, which results in a labour shortage in the sense that they are not adequately staffed during lunch hours.
5. the business model is not good and there is a problem of not being able to pay sufficient labour costs
A recent example is that many new openers build very small shops and often cannot afford to pay sufficient labour costs. In most cases, the size of sales is proportional to the number of seats, and the smaller the number of seats, the lower the sales and the more difficult it is to ensure profits.
In short, there are limits to labour costs. Often, they want to increase staff but cannot because sales are not growing.
6. nothing good happens when businesses are understaffed
Manpower shortages are a common phenomenon in Japan today. As the whole of Japan is suffering from labour shortages, there is a big problem that many businesses take labour shortages as a normal phenomenon.
It is important not to take manpower shortages as a matter of course, but rather to take serious measures as a danger signal.
・Do not take labour shortages lightly!
・Manpower shortages are a red light for survival!
Manpower shortages can cause a negative spiral, triggering a number of devious cycles, including the following
7. what is the first devil's cycle caused by labour shortages?
The most frightening thing about a shortage of staff is that the quality of the shop as a whole gradually declines, and it is not simply that the shop can no longer run. Product and service levels drop, and as a result, the whole shop falls into a devil’s cycle of losing power, attracting fewer customers, lower sales and lower profits. There are many examples of shops that shone a few years ago, but have become dull.
If you fall into this devil’s cycle, you will not be able to make it as a restaurant. Eventually, the restaurant will be forced to close, but in the process of getting there, the following phenomena will occur
8. the demon cycle caused by customer dissatisfaction
Understaffing in the hall reduces the level of service in the hall, where people have to wait longer for their orders and the cash register slows down. Under-staffing in the kitchen results in lower food quality and longer serving times in the kitchen.
As a result of the above, customer satisfaction falls, dissatisfaction rises, the number of customers visiting the restaurant falls and sales fall. This results in lower profits and forces you to cut labour costs and various other expenses.
If you are stingy with raw materials, the level of your products will drop. If you reduce labour costs, the level of service falls even further. As a result, the number of customers declines further.
9. the devil's cycle of employee dissatisfaction
When there is a shortage of staff, both the kitchen and the hall are forced to run operations with fewer people. This places an even greater burden on the few employees.
The result is overloaded work and long working hours, and as the working environment deteriorates, more and more staff quit. The increase in retirements makes the working environment even worse. As a result, it becomes impossible to keep the shop open.
Continued in Chapter 2: Essential solutions to manpower shortages