Tokyo Notes

Japan’s Untapped Resource

The solution for the country’s declining workforce? Its women.

Japan’s declining birth rate started as a headache, but is developing into a full-blown migraine for government officials and industry chiefs.

The nation is having to rely on a smaller pool of workers to shoulder the growing pension burden of a greying society. And this smaller workforce is leaving bosses struggling to find employees to fill skilled positions.

One oft-mooted solution is to ship in more talent from overseas. But with language barriers proving insurmountable for some (nurses coming to Japan from countries such as the Philippines and Indonesia reportedly are finding it difficult to master the written language), and conservatives rallying against mass immigration, this potential remedy, while requiring exploration, is not without its problems.

Japan, however, has an untapped bank of workers that both speak the national tongue and do not require work visas—its women. According to a November 2009 report by Corporate Women Directors International (CWDI), a US non-profit organization, women occupied a mere 17 seats on the boards of Japan’s top 100 companies, or just 1.4 percent of 1,198 board seats. Sony was the only company in the top 20 to have a female board member (two, in fact). 

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In terms of employing women, Japan ranks toward the bottom of the 35 nations covered by the CWDI report, below conservative Arab nations such as Jordan, Oman and Kuwait (Bahrain has the indignity of bottom spot, with just 1 percent of the board positions in the tiny kingdom occupied by women). In contrast, Scandinavian countries top the list, headed by Norway with 44 percent.

There are, of course, exceptions. Tokiko Shimizu last month became chief of the Bank of Japan’s Takamatsu branch in Kagawa Prefecture, making her the first female boss at the central bank’s 32 nationwide branches.

In an interview with Bloomberg last week, Shimizu poured scorn on the nation’s army of male managers, saying they are soft on female subordinates, and have restricted their chances of climbing the corporate ladder by failing to hand them important tasks.

The need to close the gender gap does not solely apply to senior corporate positions. In a report by PricewaterhouseCooper’s Gender Advisory Council, Goldman Sachs economist Kevin Daley writes of how parity in terms of wages and opportunities for all women can significantly boost economic growth.‘The potential dividend to economic output from reducing gender inequality is huge,’ Daley argues. ‘For the U.S. to raise female employment levels to male employment levels would raise GDP by seven to eight percentage points. For continental Europe by nine percentage points. For Japan by 16 percentage points.’

Japan’s notoriously dilatory corporate bosses need to wake up to the potential benefits stemming from greater female involvement in the workplace. But it might be up to the government to shove them in the right direction in the form of legislation similar to that seen in some northern European countries.

The Scandinavian nations that lead the way in gender equality have removed the need for women to choose between careers and children. They offer generous child-care subsidies, which not only give women the incentive to work, but have also had the effect of boosting the birth rate.

According to Eurostat, Sweden had a 70.2 percent female employment rate in 2009, and a birth rate close to 2 children per woman (one of the highest in Europe).

Contrast this with Japan. According to World Bank data, in 2008, only 49 percent of Japanese women aged 15 or older were in gainful employment—a factor that significantly contributes to a low (and decreasing) birth rate of about 1.4 kids per woman.

While the government has yet to come up with concrete measures to tackle the issue, it seems to recognize that increasing the female employment rate could have a positive impact.

Koichiro Gemba, the ruling Democratic Party of Japan’s policy research committee chairman, is charged with addressing gender equality. Earlier this month, Gemba stated that many women are capable of, but unable to work, adding: There is also a tendency for nations with higher female employment rates to also have high economic growth rates.”

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With the nation straining under the weight of its colossal debt and fewer workers propping up the creaking pension system, both the government and the private sector need to put on their thinking caps to close the gender gap and encourage meritocracy in companies and other institutions.

A change of attitude and bold child-care subsidy reforms could enable a vastly underutilized resource to have their cake and eat it—and help bring down the debt level through increased growth.