The other reason employers have continued to prefer non-regular workers, at least in the service sector, has been the fact labour productivity has continued to decline.
Japan is certainly not unique in that regard – the decline is pervasive across the developed world. However in Japan it stands in stark contrast to the automated factory sector which has made employers reluctant to raise wages.
Ready for the revolution
The real conundrum then remains the intersection of the strategic push for automation versus the immediate and clear tightness in the labour market.
No-one knows exactly how this will play out. But we can say for certain Japan will advance more quickly than most towards the automated society.
What is perhaps an interesting discussion point – and I’ll freely admit this is nothing more than a personal thesis - is Japan is almost uniquely well-placed to deal with the transition from human labour to automated machine labour.
Consider in Tokyo for example, there are currently more than two job vacancies for every job-seeker. If one of those two vacancies happened to become automated, then it is not replacing available human labour.
It is new supply filling a demand gap. In other countries this gap may normally be filled by immigration. But in Japan, substitution by machine is a culturally and politically more palatable solution.
Contrast with say Europe, where automation would theoretically be replacing under-employed youth. Or, worse still, consider the situation in developing markets such as Bangladesh or Cambodia.
In such countries, almost all labour is employed in unskilled or semi-skilled activity – such as clothing or agriculture – which is liable to automation. Assuming automation increases faster than a country can upskill, then you create a huge cadre of jobless, with little prospect of change.
These technological gains could therefore lead to social dislocation and potentially be a drag on growth despite the gains in “productivity”.
Japan, due to its demographic profile and the increasing excess demand for labour, will not face this issue – at least not in the same way. Arguably it may actually lead to greater social cohesion rather than less.
The flaw in this thesis – or more accurately the inherent conflict - is the latent availability of women workers.
Whilst female participation in the Japan labour force overall is not as low as one might think at just under 70 per cent, there is a huge gulf of untapped talent due to ‘participation’ statistics disguising the fact many of these women are working only a small number of hours - and generally not by choice.
This can be driven by the huge backlog in child day-care facilities, or by the structural disincentives posed by Japan’s spousal tax deduction, amongst other things.