Labour Shortages in Japan

Posted by Jim Ivanoff
February 13th, 2012

While many major economies around the world have been suffering high unemployment since the Lehman Shock, Japan has faired relatively well with rates in the range of 4.4% to 5.5%. The current rate in Japan is still around 4.5%, but within the construction industry many people are talking about labour shortages.

The shortages are being caused by reconstruction efforts in the Tohoku area coupled with strong demand from consumers across most of the country. The number of housing starts per year in Tohoku were not that large so as result there were not as many construction workers available there. In fact, due to weak demand before 3/11, many carpenters actually left to work in the Kanto region. Now that there is so much reconstruction work, these people are being called back while workers from other areas are also being recruited with the lure of higher wages.

This is leading to a domino effect where construction companies as far away as Kyushu are having to pay higher wages or risk losing their workers to Tohoku. This year the Sea of Japan side of the country has seen record snowfalls and the labour shortages are even hampering snow removal efforts. In places such as Aomori local communities in the past could count on construction workers and their dump trucks to help with cleaning roads. This year both the workers and the heavy equipment are working overtime in tsunami devastated areas.

The biggest concern to many industry people is that real reconstruction efforts have not even begun yet. Removing debris is still the main task, but this is expected to transition to full scale reconstruction as the summer approaches. Additionally, the Japanese government has announced its intentions to raise the consumption tax to 10% from 5% within a few years which means that many people considering to build new homes will push up their plans to avoid paying the extra tax. Full scale reconstruction in conjunction with increased demand will inevitably lead to even more pressure on the construction labour market.

This situation is very reminiscent of the period after the Kobe earthquake. Just as reconstruction of the city was in full swing, homebuyers were preparing for the consumption tax to be raised from 3% to 5% in 1997. This is leading people in the industry to predict a return to Kobe era trends such as bringing in carpenters from North America as well as a boom in imported housing packages.

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