Japan faces record population decline and growing labor shortages

The native population in Japan fell by over 300,000 in 2016, the fastest rate since records began according to recent figures from the Internal Affairs Ministry. Meanwhile, the job-to-applicant ratio reached a 43 year high in May, with an average of 1.49 vacancies for each applicant.

Shrinking population size has been a concern in Japan for a number of years now, and 2016 marked the eighth year of decline. Despite government policies designed to encourage young people to marry and have children, research shows around 64% of Japanese 18-34 year olds have never been in a relationship and in 2016 the number of births dropped below one million for the first time since 1979. Japan's National Institute of Population and Social Security Research predicts that, if current trends persist, the population will decline by a further 40 million by 2065.

The impending population crisis has direct implications for the economy in Japan. A recent poll suggests that shrinking domestic demand is the biggest concern for Japanese firms, followed by labor shortages.

Increasing levels of immigration could be a way of mitigating population and labor supply problems, though it is a highly contentious issue in Japan. As an alternative to encouraging permanent immigration, the government has introduced a foreign trainee program allowing unskilled workers to take up jobs in Japan for up to three years before returning home. As a result, the number of foreign residents in Japan went up by 6.85% in 2016 to 2.3 million.

In an article for IZA World of Labor, Amelie Constant highlights the positive impacts of immigration on host communities, stating that migrants “fill labor shortages” while their presence “increases demand … creating more jobs for immigrant and native populations.”

Paul Spoonley, also writing for IZA World of Labor, addresses policies designed to alleviate tensions around immigration, integration and social cohesion. He recommends that governments “support inclusive intercultural dialogue, adopt anti-discrimination law and policies, support migrant organizations, and address negative attitudes and discrimination that contribute to community tension and exclusion.”

Read more articles about migration policy in relation to the labor market.