The presence of foreigners in Japan’s labor market is rapidly increasing. This is because companies are actively hiring foreigners against the backdrop of an unprecedented labor shortage, and the government has also been supporting the expansion of the number of foreigners. However, relying too much on foreigners, who make up the bulk of the workforce, as a cheap labor force will not improve corporate productivity and may even hinder wage increases for Japanese workers.

According to the Ministry of Health, Labor and Welfare, the number of foreign workers in Japan reached a record high of 2.048 million as of the end of October last year. By status of residence, residence statuses based on status such as permanent resident or spouse of a Japanese national, residence statuses in specialized/technical fields such as highly skilled professionals account for approximately 30%, and technical internships account for approximately 20%.

Many of them are treated as cheap labor, and there are only a limited number of highly skilled people who earn the same or higher incomes than Japanese people.

According to the 2020 Economic and Fiscal White Paper, the wage difference between Japanese and foreign workers is 28.3%. Approximately one-quarter of these cases cannot be explained by differences in the attributes of individuals or businesses.

For example, among foreigners with specific skills, wages are about 15% lower than Japanese workers for workers engaged in factory production processes, and wages are slightly less than 20% to over 30% lower for technical interns.

The government will also change its policy for accepting foreign workers. In June, the revised Immigration Control and Refugee Act was enacted, creating a new system for accepting foreign human resources called “Development Work” to replace technical intern training. The idea is to accept foreigners in fields where there is a shortage of workers, such as agriculture and construction, develop them into people with “specific skills,” and have them work for a long time.

Blindly increasing the number of low-wage foreign workers could lead to suppressing wages across the country. Takashi Sakamoto, a researcher at Recruit Works Institute, says, “We need to consider the extent to which we accept foreign workers while taking into account the impact on the overall market.”

The government is promoting the labor participation of foreigners, women, and the elderly, while working to achieve sustainable and structural wage increases. Mr. Sakamoto said, “If wage costs rise, companies will no longer be able to hire more employees. Efforts to improve productivity will naturally emerge.” (Aya Yonezawa)

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