Japan’s Talent Mismatch Ranks the Most Severe in Asia Pacific

September 30, 20158:17 am2295 views

Japan’s talent mismatch has been ranked the most severe in Asia Pacific, showing that there is a significant gap between the skills that businesses are looking for and the skills available in the labour market.

Japan has been given the highest score possible – 10.0 – for talent mismatch in a global assessment of the efficiency of skilled labour markets in 31 countries. No other country in Asia Pacific received such a high score for talent mismatch. Japan’s score is up from 9.5 last year.

The Hays Global Skills Index 2015, produced in collaboration with Oxford Economics and released today, showed an overall score of 6.1, a slight worsening on 2014. Seven indicators, or points of potential pressure, make up the ranking and each received a score out of 10. A score close to 0 indicates little to no pressure, while a score close to 10 shows severe pressure. The Index shows that in Japan, pressure on labour market comes from five of these indicators.

“The significant gap between the skills employers need and those available continues to severely affect the labour market and is one of the biggest challenges employers face this year,” says Marc Burrage, Managing Director of Hays in Japan.

Hays GSI by Country

Burrage added: “This is a huge problem as unemployed candidates cannot be matched with available jobs. If we can train candidates in the skills employers want, Japan can ease its skills shortage.  However our results indicate the opposite is occurring, since Japan’s score was 9.1 in 2013, 9.5 in 2014 and now 10.0 this year. This shows that the mismatch has intensified over the past three years.”

See: Japanese wages post 0.6% rise, steepest in a decade

Despite the recent 0.3 per cent increase in real wages being less than expected, the second indicator or pressure point is ‘overall wage pressure’, which measures whether wages are keeping pace with historic trends and for which Japan received a very high score of 8.1. This shows that wages are increasing much quicker than Japan has historically seen.

“This supports what we’re seeing on the ground, namely overall labour market tightness as employers compete for talent based on salary,” says Marc. “It also shows that further salary increases are not necessarily the solutions to alleviate skills shortages.”

The third indicator is ‘labour market flexibility’, for which Japan received a strong score of 6.7. This indicator measures the legal and regulatory environment faced by businesses. Although this score is down from 7.1 in 2014, a score of 6.7 is still high, suggesting there are barriers restricting the labour market. The drop in the score is due to reforms such as womenomics, and further reforms could help ease the skills shortage.

Japan Talent Mismatch- Hays GSI 2015

“Additional pressure comes because most of Japan’s labour force is already utilised and the available talent pool therefore can’t be increased in great numbers,” says Marc in reference to Japan’s score of 6.1 for ‘labour market participation’. This means Japan can’t relieve the skills shortage by raising the employee participation rate.

The final pressure point is ‘wage pressure in high-skill occupations’, for which Japan received 6.2. “Japan’s score jumped up from 5.0 last year to 6.2 this year, suggesting that wages for highly-skilled candidates, such as managers, senior officials or skilled trades, are rising faster than for low-skilled candidates, such as process, plant and machines operatives, and administration workers. This shows there is a shortage of highly-skilled candidates with the necessary skills.”

For the remaining 2 indicators, the Hays Global Skills Index ranked Japan fairly positively. Japan’s education system is well equipped to meet future talent needs (we received 3.0 for ‘education flexibility’), and wages for those in high-skill industries are rising in line with wages in low-skill industries (2.5 for ‘wage pressure in high-skill industries’). These are positives on the labour market in Japan.

Also read: Challenges in Hiring and Retaining Talent in MNCs in Japan

Image credit: hays.co.jp

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