How Japan can take the lead with an ageing workforce

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum. Author: Makiko Eda, Chief Representative Officer, World Economic Forum Japan, Member of the Executive Committee

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Japan, like many countries around the world, faces the transformative effects of Globalization 4.0, as Fourth Industrial Revolution technologies put pressure on existing economic and social systems. According to the 2018 Future of Jobs Report, 75 million jobs are expected to be displaced in 20 major economies by 2022, creating a need for public and private solutions to meet new labor demands.

At the same time, Japan must also address the immediate demographic challenges of an ageing workforce. More than 27% of the population is over 65 years old, and the birth rate was 1.43 in 2017 – well below the replacement level. According to recent research, the country will face a shortage of 6.44 million in the labor force by 2030. Tokyo alone will be short 1.33 million workers.

These shifts mean that Japan must not only respond to an evolving labor market but also to a lack of workers, an issue that will increasingly affect countries around the world. To overcome these challenges and realize the benefits of digital transformations, an inclusive approach and reskilling initiatives will be key.

Research suggests that to create a sustainable labor market, by 2030 Japan should encourage an increase of 1.63 million seniors, 1.02 million women and 81,000 foreign nationals to the workforce, in addition to adopting emerging technologies that can increase efficiency and promote sustainable growth.

The country must also ensure that new and existing workers have the necessary skills to thrive in a changing work environment. Technological advancements could create 133 million new roles worldwide, which would require that 54% of all employees receive reskilling or upskilling by 2022, according to the Future of Jobs Report. For such a massive undertaking, the government and businesses must partner together for solutions.

In Japan, 99% of employees work for small businesses, which do not offer training as often as larger ones. Governments must thus strategically partner with businesses to create reskilling initiatives and support investments in three main areas: people’s capabilities, institutions related to work, and high-growth sectors.

According to the 2019 Towards a Reskilling Revolution report, it is in the financial interest of companies to take on reskilling for 25% of those employees who are at risk, even taking into account indirect societal benefits. Companies that are robust at retraining in a non-traditional manner will be ahead of the game.

Japan also faces the demands of increasing life expectancies. There must be a cultural shift to provide life-long learning opportunities and supportive ageing policies in the workplace.

Gender parity is another challenge, with Japan ranking 110 out of 149 countries in the 2018 Global Gender Gap Report. While a focus on “womenomics” has increased female labor participation in the country to a record 71%, moving forward, there must be a continued focus on proactive measures from governments and businesses to ensure women are equally represented in the highest-growth occupations and that they are equipped with the skills they need to excel in the future.

There is an incredible opportunity for Japan to overcome these challenges by focusing on inclusive reskilling, which aligns with the country’s commitment to Society 5.0, a human-centered approach to economic advancement. As the country enters a new era, Japan can champion inclusivity, adaptability and gender parity to meet the challenges of the future.