Published in the Nikkei Asian Review 11/7/2015
The quiet triumph of Abenomics is bringing forward a controversial policy question — how to deal with Japan’s structural shortage of labour. The optimum solution will likely involve an increase in the number of foreign workers, but not mass immigration. Japan has an opportunity to craft a policy that vitalizes the economy while conserving precious social capital.
The last time the subject was debated seriously was in the late 1980s, when automotive manufacturers were suffering from a shortage of factory workers. The policy response was a welcome mat for 320,000 Japanese-Brazilians (at peak) on the mistaken grounds that they would be attuned to Japanese cultural norms.
Soon, though, the post-bubble economic doldrums set in. After the global financial crisis of 2008, Japanese-Brazilians suffered an unemployment rate of up to 45% and the Japanese government set up a program incentivizing them to return home.
Fast-forward to the present day and the Japanese economy is effectively running at full employment, with the ratio of job offers to job applicants at a 23-year high. No surprise, then, that there are signs of increasing pressure on wages. In April, total cash earnings rose 0.9% year-on-year, which sounds low but constitutes the best growth in a decade.
The “precariat”– those with insecure or unpredictable employment — are seeing better times too. According to the employment agency Recruit’s research unit, all categories of part-timers are seeing wage gains, with the average rate at 1.5%. Meanwhile Tokyo University’s Daily Price Index is showing the strongest inflationary presures since the dawn of Abenomics.
The labour shortage is slowly starting to bite.
EMPATHY AND IDENTITY
Currently Japan’s immigrant population (according to the United Nations’ definition) is about 2% of the total. This is low by the standards of other high-income countries, where the average is 11%. Yet immigration on this scale is a relatively recent experiment in much of the developed world, with unpredictable long-term consequences. In the U.K., for example, the proportion of immigrants has doubled since 1990. In Italy it has trebled.
Haruko Arimura, Japan’s Minister for the Empowerment of Women, recently warned of opening the “Pandora’s box” of immigration. “If we want to preserve the character of the country and hand it on to our children and grandchildren in better shape, there are reforms we need to make now to protect those values,” she declared.
Arimura is a mother of two married to a Malaysian, so she speaks from experience when she cites social tensions caused by mistreatment of immigrants and the dangers of extremist ideologies. Mainstream Western politicians would be reluctant to voice their concerns so bluntly, but many ordinary citizens might agree. Even in the U.S.A, a nation of immigrants, 45% of the public believes that immigration currently presents a problem, not an opportunity. In Britain, 75% favor reducing immigration.
Recent research confirms that immigration can dilute social capital. Using a large American sample, Harvard Professor of Public Policy Robert Putnam found that the greater the proportion of immigrants in a community the lower the levels of mutual trust – not just between immigrants and the indigenous population, but within the indigenous population itself as well.
Paul Collier, Professor of Economics at Oxford University, believes that moderate migration is liable to confer overall benefits, whereas rapid migration risks substantial costs in terms of declining “mutual regard” – the social foundation of the trust that supports co-operation and the empathy that supports equality.
“For redistribution to be politically feasible,” he notes, “high earners must see low earners as themselves minus good fortune … The immigration of culturally distant people who disproportionally occupy low-income slots in the economy weakens this mechanism.”
THE 100-YEAR OLD SWIMMING CHAMP
As Arimura hints, Japan can use its workforce more productively by offering better training and career opportunities to capable women. The over-60s are another source of human capital. Japan’s workers already retire 9 nine years later than French workers, but the health and energy levels of Japan’s senior citizens suggest that further gains are possible.
The role models here are Yuichiro Miura, who reached the summit of Mount Everest at the age of 80, and Mieko Nagaoka, the centenarian who can swim 1,500 metres in 75 minutes.
Inevitably, though, there are limits to what reform can achieve. And just as nature abhors a vacuum, so labour moves from areas of oversupply to areas of shortage. You cannot sit on the lid of Pandora’s box indefinitely. The question is whether the flows will be managed strategically or, as at present, left to the kind of operators who thrive in grey areas.
Different kinds of immigrants need different approaches. Japan already hosts 150,000 foreign students, making it the world’s seventh largest educational destination. A bona fide college education should ensure a high degree of cultural integration and also above- average earnings power.
Whether finding jobs in Japan or returning home, perhaps to work for Japanese companies, these students are a valuable resource in developing relations with other Asian countries, particularly those in South Eeast Asia that Japan is trying to cultivate as allies. Increasing the quota would be a wise strategic move.
Likewise, elite professionals, though small in number, can offer unusual skills, bring intellectual diversity and raise Japan’s global profile. The combination of a points system, similar to that those used by Canada and Australia, with U.K.-style “non-dom” tax breaks for people living in the country but not domiciled there would attract high-grade individuals with the requisite qualifications.
The most numerous and controversial type of immigrant is the unskilled or semi-skilled worker doing the so-called “3K” jobs (kitanai, kitsui, kiken –, meaning “dirty, tough, dangerous”) that are unpopular with native citizens. These are the immigrants that Japan needs most urgently but temporarily -– which is to say over the next 30-50 years — as the demographic imbalance caused by ageing works through the population pyramid.
The European experience is that this group is most likely to form unassimilable diasporas within the host society, leading to social frictions. The best solution would be a variation of Germany’s now-discontinued gastarbeiter or “guest worker” system, which would offer multi-year working visas with generous financial terms, but strict expiry dates.
In today’s world splendid isolation is not an option, and xenophobia does long-term strategic damage. Japan needs to be open, but it also needs to handle the complex issue of immigration in a pragmatic way that avoids the serious mistakes made by some other developed countries.