Japan faces shortfall of employees to meet labour demand by 2040

In the face of labour shortages, Japan wants to reverse the decline in the birth rate while remaining cautious about long-term reliance on immigration.
By: | April 3, 2023
Topics: Japan | Mobility | News

As Japan’s population continues to age rapidly, the country is projected to face a significant shortage of employees by 2040, with a potential shortfall of over 11 million individuals.

According to a study by independent think-tank Recruit Works Institute, the working-age population is expected to decline from 2027, resulting in a reduction in the employee supply by approximately 12% in 2040. This decline, the study added, will occur despite consistent labour demand, which poses a challenge to the nation’s economy.

In response to these findings, Japanese Prime Minister Fumio Kishida has identified reversing Japan’s declining birth rate as a key priority for his government. To this end, the government has pledged to invest around 1 trillion yen (US$7.53 billion) in training employees for high-skilled jobs over the next five years.

However, the report cautioned that shortages are expected to become more severe in labour-intensive sectors such as transportation, construction, and healthcare due to the growing demands of an ageing population. Additionally, Shoto Furuya, the study’s Chief Researcher, suggested that boosting immigration may not be a viable solution over the long term due to Japan’s relative decline in global economic standing and similar ageing crises around the world.

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Another study by Value Management Institute, a research and consulting services provider, suggested that Japan would need 6.74 million foreign employees by 2040, almost four times the number in 2020, to achieve an average annual growth of 1.24%.

The report’s findings indicated that all of Japan’s prefectures except Tokyo are expected to face a labour shortfall by 2040, which could exacerbate the country’s existing rural-urban divide. The study also predicted that Kyoto prefecture would lack about 39% of the employees it needs, while the northern island of Hokkaido would have an insufficiency rate of nearly 32%, reported The Business Times.