Japanese Firms Face Worst Full-Time Worker Shortage Since Pandemic

Severe Labour Shortages Widespread Across Industries

A recent survey conducted by Teikoku Databank Ltd. has revealed that Japanese firms are feeling the most acute shortage of full-time workers since the COVID-19 pandemic. The survey, which polled around 11,000 companies, found that 53.4% of firms need more full-time workers, the highest level since April 2020 and close to the all-time high of 53.9% in November 2018.

Information Services and Construction Sectors Most Affected

According to Kyodo news, the sector most in need of full-time workers is information services, with shortages of system engineers, followed by construction. This shortage is likely to have a significant impact on the economy, as these sectors play a crucial role in driving growth and innovation.

Part-Time Worker Shortages Also Widespread

The survey also found that 30.6% of firms lack part-time workers, with staffing firms feeling the most acute shortage of nonregular workers ahead of restaurants. This suggests that the labor shortage is not limited to full-time workers, but is also affecting the availability of part-time and temporary workers.

Wage Growth and Labour Unions in Focus

The survey comes as economists keep a close eye on whether the robust wage growth seen last year will continue. Major Japanese firms will soon decide their response to demands for pay hikes by their labour unions, wrapping up their annual “shunto” negotiations by the end of this month.

Wage Increases Planned to Secure and Retain Workers

Some 68.1% of firms hit by labour shortages are planning to raise wages for full-time workers in fiscal 2025 from April, according to the research institute. This suggests that companies are willing to invest in their employees to secure and retain them, particularly in a tight labor market.

Challenges for Small and Midsize Firms

Economists warn that small and midsize companies will struggle to keep pace with bigger firms that have the financial resources to continue hiking pay. As a result, there is a risk of more companies going bankrupt due to labour shortages.

A Risk of Bankruptcies

“We have to be vigilant against the risk of more companies going bankrupt due to labour shortages,” the research firm said, noting that the number of such bankruptcies hit a record high in 2024. This highlights the need for policymakers to take action to address the labor shortage and prevent further economic disruption.

Conclusion

The survey reveals a severe labor shortage affecting Japanese firms, with widespread shortages of full-time and part-time workers. To address this issue, companies are planning to raise wages to secure and retain employees, but small and midsize firms may struggle to keep pace. As the economy continues to recover from the pandemic, it is essential to prioritize labor market issues to prevent further economic disruption.

FAQs

* What is the current state of the labor market in Japan?
The labor market in Japan is experiencing a severe shortage of full-time and part-time workers.
* Which sectors are most affected by the labor shortage?
The information services sector, particularly in system engineering, and construction are the most affected.
* How do companies plan to address the labor shortage?
Companies are planning to raise wages to secure and retain employees, with 68.1% of firms hit by labor shortages planning to raise wages for full-time workers in fiscal 2025.
* What is the impact on small and midsize firms?
Small and midsize companies may struggle to keep pace with bigger firms that have the financial resources to continue hiking pay, potentially leading to a risk of bankruptcies.