The world is aging. Incidentally, rich nations are in the queue. They are Japan, Korea, UK, France, USA and China. Japan is in the lead in the race.
“Japan is moving an aging society at a speed, which no other country has ever experienced or will in the near future”, according to Mr Jitsuro Tarashima, Chairman of Japan Research Institute. In 2015, Japan’s population was 127 million. By 2050, it will be lower than 100 million, according to Mr. Jitsuro. Today 28 percent of the Japanese population is above 65 years of age. By 2050, it will touch 38 percent or 38 million above 65 years of age, according to Mr Jitsuro.
This leaves 62 percent or 62 million Japanese people in the age group 0-65 by 2050. Assuming the current trend of child population between the age group of 0-14, which account for 12 percent of the population and middle age group of 15-64, which account for 60 percent, continue, the working population strength will be 60 million by 2050.
In addition, the threat rages for a depopulation in Japan. Fertility rate continues to decline. In 2012, total fertility rate was 1.4 children per women. Combined with aging people and decline in fertility rate, Japan will face a human capital hollowness by 2050.
This underlines dark days ahead for Japan for human capital resources. The significance of human capital to any economy is its working population and domestic demand. At the time when the world is heading for protectionism, following Trumpnomics, lags in working population and domestic demand will act major headwinds to the potential growth of Japanese economy. Given the structural shift in global economy, is 60 million working population enough to bolster Japan’s economy in 2050?
Realizing the black days ahead due to drying up of human capital, Prime Minister Shinzo Abe sprung to action to stabilize the population at 100 million by 2065. He announced several measures to increase the birth rate from 1.42 per woman (2015) to 1.8, by raising childcare services.
The Japanese government is also considering to raise the retirement age for its employees from 65 to 70 to nix the labour crunch. Currently, many jobs remained unfilled, particularly in the areas of construction, hospital and nursing, personal care and retail services.
Albeit, these measures are unlikely to overcome human capital shortages in Japan. Given the situation, immigration can only be a solution to nip the bud of shortage in human capital. USA is a case in point. The USA is heading for a serious demographic pain. By 2035, people over 65 of age will outnumber people under the age of 18 for the first time in American history. This steered the need for new health workers to take care of its aging population, according to CED ( The Committee for Economic Development of the Conference Board).
Diagonally opposite, India is among few countries in the world with demographic dividend. Nearly 66 percent of the Indian population belong to 15-64 age groups. “By 2020, the average Indian will be only 29 years of age, compared to 48 in Japan, 45 in Europe and 37 in China”, according to Mr S. Ramadorai, Chairman of Tata Consultancy Services. Given the demographic windfall, an unprecedented opportunity lies for India to play an important role in curbing the demographic imbalance in Japan. “ India can be an human resource bank of the world if the skills suit to the country”, according to Mr Ramadorai.
India produces a million of technocrats every year. According to AICTE ( All India Council for Technical Education), every year one million engineering graduates and diploma holders are added to the technical pool of workforce.
However, the level of skill in India is reliant on medium skill operations. According to ILO data, they include sales and service workers, skilled agriculture workers, trade workers and plant machinist. Nearly 60 percent of workers are employed in this scale of skill.
Only 20 percent are employed in high-skilled jobs, such as managers, professionals and technicians. Even though the ratio is less in terms of percentage, in number they are large owing to a big population.
The World Bank’s “Global Economic Prospects” report shows that the second wave of change in the global labour market will arise in the next two decades, with developing countries contributing largely to the pool of skilled workforce. This is because the number of skilled workers in developed nations will be on declining trend due to low birth rate and aging people.
Nonetheless, crucial problem for immigration in Japan is foreigner xenophobia. Only 2 percent of its population is foreigners, compared to 4 percent in South Korea and 16 percent in France. According to a survey by Yomiuri Shimbun, 59 percent were reluctant to receive services of foreign care workers.
Furthermore, the survey revealed that 53 percent respondents were reluctant to live near foreigners. Japanese tenants are reluctant to give their houses to the foreigners.
The reasons for this are fears for growing crimes and set back to social practices, the Economist said. The cultural gaps, life long employment system and promotion by seniority and not by performance, are often turned barriers to foreign workers to work in Japan. Concerns were also expressed over technology drain. Japanese employers fear that when these foreign workers return to their country, there is a possibility of a technological drain.
Thanks, then, to the Japanese government for easing visa rules since April 2019. Japanese parliament amended its immigration law to attract 345,000 foreign workers over a period of five years. The significant difference between Japan and other nations’ immigration policies is that while other nations opened their doors for foreign workers only in highly skilled jobs, Japan opened for multiple categories, including marginally skilled, semi-skilled and highly skilled workers.
This suits the Indian workforce, who are reliant on middle level skill. There are two sets of visa to be issued to the foreign workers – Technical Intern Class 1 and Class 2. Technical-1 refers to marginal skilled workers in designated fields. Technical -2 is directed to semi-skilled workers with work experiences in designated fields.
Liberalizing migration for semi-skilled workers will open a new opportunity for Indian workers. Indian workers can pose challenges to other foreign workers at the behest of their cheap workforce. For example, opportunities will arise for Indian semi-skilled and marginal workers in construction sectors, where they have an edge over others. This is because they will be cheaper and have experiences in overseas construction works, derived from oil rich countries’ construction boom.
Nursing is another area. Its requirement will increase with the growing Japanese aging people. Indian nurses have global reputation. They have already outsmarted Philippine nursing care service workers in UK and Ireland. According to a survey, three quarters of the employers surveyed in these countries advocated India as primary source country for registered nurses.
Given the demographic advantage of India, a new chapter opens for India – Japan economic relations. At the outset, the foremost task will be to foster a new look towards foreigners among the Japanese to wipe out the foreign xenophobia. The second important task will be skill development of Indian workers. This needs a massive role by Japanese government, training institutions and social and welfare institutions, such as NGOs and intervention at the Japanese school level to remodel the children mindset, before they plunge into cultural taboos.
Views expressed are personal