April 20, 2024

Japan turns to innovation to face job crisis

With 500 days left until the opening of the Osaka World Expo in spring 2025, its secretary-general, Hiroyuki Ishige, assured the public that the multi-billion-dollar global exhibition would be ready on time.

Ishige’s confidence may be genuine, but the fact that he had to address the issue is the result of a crisis far beyond his control. The Expo, a dusty, arid site with little yet built, is the most prominent victim of the national shortage of construction workers.

The shortage of workers in the world’s fastest aging economy is profoundly affecting the way government, businesses and people operate now and think about the future.

Even the most iconic features of Japan’s famous service economy are at risk. Central Japan Railway put an end to the beloved food cart on the Tokyo-Osaka bullet train in October, while across the country vending machines become increasingly empty for days.

“Japan’s labor shortage occurs regardless of whether the economy is doing well or not,” said Shoto Furuya, chief researcher at the Recruit Works Institute. “We are beginning to lack essential services that we depend on to maintain people’s lifestyles and social infrastructure.”

RWI estimates that the country will have a labor shortage of 11 million people by 2040, and the number of people over 65, who already make up almost 30 percent of the population, is expected to peak in 2042.

Over the past decade, Japan has relied on female and older workers amid strict restrictions on hiring foreign workers. But Naruhisa Nakagawa, founder of hedge fund Caygan Capital, said that starting this year this would no longer be enough and the country’s workforce would begin to decline.

The response of Asia’s largest advanced economy to this jobs crisis will be closely watched, especially by its neighbor China, whose population has also begun to shrink.

One way Japan is addressing the demographic challenge is by introducing avatars, robots and artificial intelligence into the workforce in key sectors:

Japan’s construction industry has long struggled to hire workers despite attempts to attract more women and young workers, trying everything from raising wages and offering more modern work uniforms to installing portable toilets for women. in construction works.

Still, the number of people employed in the sector has fallen 30 percent to 4.8 million workers since its peak in 1997, according to the Ministry of Land, Infrastructure, Transport and Tourism.

Ministry data also shows that only 12 percent of construction workers are under 29 years old, while about 36 percent are over 55 years old. The sector’s staffing problems are so serious that it has been given five years to prepare for new labor standards to come. A law will go into effect in April that would reduce overtime for construction workers and truck drivers.

As the reality of these shortages has set in, the estimated cost of the Expo has doubled to more than $1.6 billion, as contractors are forced to pay more to attract workers. Some countries, fearing rising costs and delays, are reducing their presence. Japan’s great national showcase could be directly harmed by its labor shortage, diplomats have warned.

For Daniel Blank, CEO of the start-up Toggle, the crisis presents a business opportunity.

Blank traveled from New York to Japan last year to promote the use of industrial robots to automate the most labor-intensive process for construction companies: assembling rebar. Last year, Toggle raised a combined $1.5 million investment from Tokyu Construction and Takemura, another Japanese construction group.

“Japanese companies are looking for new technologies all over the world,” Blank said. “Actually, everything is due to the problem of scarcity. With labor becoming more expensive and harder to find, new ways to execute construction projects need to be found.”

For decades, candy giant Lotte has been delivering its chocolate-filled bear cookies, Koala’s March, by truck. Now, in preparation for a serious driver shortage as the change in overtime rules takes effect, one of the country’s favorite children’s snacks will be delivered by train.

Other companies across Japan, including carmaker Toyota and e-commerce group Rakuten, are making similar preparations, with the development of robots and autonomous vehicles, as well as consolidations with smaller rivals.

Japan’s approximately 4 million vending machines require an army of truck drivers to keep them filled. Increasingly, the gaps between recharges are widening, especially in rural areas and even in large cities. The industry is quick to adapt. JR East Cross Station, a food and beverage provider, began using trains in November to transport beverage cans to refill some vending machines.

At its Motomachi plant in Aichi Prefecture, central Japan, Toyota has begun using a fleet of “vehicle logistics robots” to pick up and move cars to the loading dock. Over time, the automaker hopes to replace 22 human workers at the shipyard with 10 robots.

“The truck driver shortage is not just a 2024 problem, but a problem we have been facing for a long time,” said a Toyota manager. “These efforts alone will not offset the number of drivers we need.”

Last summer, in the farmlands of Miyazaki Prefecture in southern Japan, a robot duck called Raicho 1, from Kyoto-based robot maker Tmsuk, headed to rice paddies to beat up weeds. The solar-powered robot was just one of a suite of drones and robots designed to plant, cultivate and harvest a standard rice crop without the use of humans. A high-pressure water cannon was used to scare away wild boar and deer, which now roam more freely as the area’s human population has declined.

The experiment that ended with the October rice harvest produced a potentially interesting result for both the company and Japan: the total number of human hours involved in the process fell from 529 to 29, a 95 percent reduction in labor. work, compared to only 20 percent. reduction in total rice yield.

As Japan’s population has shrunk and aged, agricultural labor shortages have become severe. Government data shows that in caloric terms the country was self-sufficient to cover 38 percent of its needs in 2022, against a government goal of 45 percent by 2030.

That goal appears increasingly impossible to achieve, as the national average rate of abandoned farmland exceeds 10 percent. As the best arable land has been given over to pasture, analysts warn that some of Japan’s most famous agricultural products, including regional sakes and other specialty foods, could be lost.

With 43 percent of Japanese farmers over 75 years old and the average age of all farmers nearly 68, Tmsuk CEO and founder Yoichi Takamoto said Japan had no choice but to adopt a robotic workforce.

At a small shop in central Tokyo that sells everything from toothpaste to egg sandwiches and socks, a smiling staff member welcomes customers at the door. Friendly and lively, offers greetings and advice from a 4-foot screen.

The newly installed avatar is controlled remotely by an employee at retail chain Lawsons and is part of a trial with Avita, the company behind the technology.

“We started thinking about this during the Covid-19 pandemic as a way to protect workers and now it’s a way to allow people to work who would otherwise have difficulty being physically present in stores,” said Kazuki Tsukiuda, a senior Lawson executive.

In the future, the plan is for each operator (whether a working parent, a senior returning to the workforce, or someone with a disability who prefers to work from home) to control three or four avatars, allowing the chain Retailer work night shifts. and rural towns.

Labor shortages have forced Japanese retailers and convenience stores, known as combined, to cut hours and services. According to the Japan Franchise Association, the country’s convenience stores were short 172,000 workers in 2020 and the trade body predicts a gap of 101,000 workers by 2025. As a result, the association says 87 percent of combined They are now open 24 hours a day, up from 92 percent at the end of August 2019.

Hiring foreign students, who can work despite the country’s strict immigration restrictions, is another option. But some require weeks of training to meet customer expectations. “There are only a few who understand the Japanese way of polite and genuine customer service and can offer it in Japanese,” Tsukiuda said.

Although only eight Lawsons currently have avatars, Shogo Nishiguchi, Avita’s chief operating officer, said the “mission” was to have 100,000 avatar operators working across Japan by 2030. “In rural areas, avatars can keep stores open.” Tsukiuda said. “Even if we double salaries, there is simply no one to hire.”

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