Japan confronts labor shortages as elderly population reaches record high
In Japan, at least 54 people die annually because of overwork
As Japan recently celebrated “Respect for the Aged Day,” new government data has cast a spotlight on a pressing national issue: the aging population. With the number of citizens aged 65 and over reaching a staggering 36.25 million, constituting 29.3 per cent of the overall population, the country faces an increasingly acute labor shortage as detailed in a CNBC report.
Record numbers highlight a growing concern
The Statistics Bureau of the Ministry of Internal Affairs and Communications revealed that Japan's elderly demographic has grown to the highest proportion globally. This shift poses significant challenges as the country grapples with a declining overall population.
Robert Feldman, a senior advisor at Morgan Stanley MUFG Securities, emphasised the implications of these trends, stating “The labor shortage is just as bad as ever,” particularly in labor-intensive sectors such as food service.
Moreover, 2023 marked a notable increase in workers aged 65 and over, with the figure reaching 9.14 million. Feldman cautioned that as these seasoned workers retire, the influx of younger employees is insufficient to fill the gap, a situation worsened by a recent Teikoku Databank survey indicating that 51 per cent of companies report a full-time employee shortage.
Future projections for the Japanese economy
Looking ahead, Japan's demographic situation is expected to worsen. Projections from the National Institute of Population and Social Security Research suggest that by 2040, elderly individuals will make up 34.8 per cent of the population. Feldman noted that based on historical trends, the total labor force could decline from approximately 69.3 million in 2023 to just 49.1 million by 2050.
In response to these trends, the Japanese government has implemented various measures aimed at combating low birth rates. Prime Minister Fumio Kishida’s administration has initiated policies to provide financial support for child-rearing and increase the availability of childcare facilities. Furthermore, local governments are promoting initiatives like public dating apps to encourage marriage and family formation among younger generations.
Migration and technological solutions
While boosting birth rates may eventually help, it will not resolve the immediate labor shortages. Consequently, Japan has begun to open its doors to foreign workers, reaching a record of 2 million foreign nationals in 2024, with plans to increase this number by 800,000 over the next five years.
However, Feldman argues that even with increased immigration, Japan will need to significantly enhance the productivity of its remaining workforce to fight with the expected demographic declines. “A large portion of that drop in the domestic labor force has to be made up by better productivity of those young people who will remain,” he explained.
The integration of advanced technologies, such as artificial intelligence and automation, will be crucial in this endeavor. Despite the promise of artificial intelligence (AI) as a solution to Japan’s labor issues, experts like Carlos Casanova, senior economist for Asia at UBP, caution that technology alone cannot address the fundamental demographic challenges. “AI can be part of the solution, but there are other things that they have to do,” he remarked, suggesting a comprehensive approach that also includes increasing female workforce participation.
