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Japan wants skilled immigrants but hindered by inflexible system

By Noah Smith / Bloomberg Even as the Trump administration tries to think up ways to keep talented foreigners out of the United States, Japan is trying to lure them in. But it’s having trouble getting them to come.

A lot of people think of Japan as an insular country, but that isn’t actually true. The number of foreigners living in Japan has risen a lot in recent years. Most of these foreign folks are temporary residents, such as either guest workers brought in on “technical intern” visas and overseas students working while they complete their degrees. Some will rotate back out to their countries of origin while new temporary workers rotate in. Others will stay, especially those who marry locals and settle down in Japan.

But the government of Prime Minister Shinzo Abe isn’t satisfied with letting in convenience-store clerks and fry cooks to alleviate the labor shortage created by an aging population. It wants more skilled immigration — engineers, entrepreneurs, researchers, managers and professionals. In order to attract global talent, Japan’s government has followed the example of countries such as Canada, and introduced a points-based immigration system. Advanced degrees, language skills, work experience and other qualifications are tallied up and a high score can help foreign workers earn permanent residency — the equivalent of a U.S. green card — in as little as one year.

The administration has thus taken to boasting that it has the quickest permanent residency system in the world. After that, it takes five years of residency and another year or so of paperwork to become a citizen of Japan.

So for skilled workers, Japan is now among the easier rich countries to move to. There’s just one problem — skilled workers aren’t coming. According to the IMD World Competitiveness Center, Japan is the Asian country least appealing for foreign talent.

It’s a bit embarrassing to be beaten out as a work destination by countries where millions die from air pollution every year, or where mad leaders carry out thousands of extrajudicial killings. Japan is a wonderful place to live — it’s clean, safe and friendly, it has great infrastructure and excellent food, there are a million fun things to do, and the average home is actually bigger than in Germany or Britain. Why wouldn’t talented people be looking to move to Japan?

One reason is language. When I spoke with Tim Eustace, the founder of Next Step, a Tokyo-based recruiting firm, this was the first issue he brought up. Although Japan has plenty of English signs in streets and train stations, business and schooling are both conducted exclusively in Japanese. Eustace believes that many top international workers in fields such as finance and technology expect to be able to send their children to English-language schools, and to speak English in the workplace at least some of the time.

That probably isn’t happening soon — Japan’s English proficiency has never been great, and the country’s leaders are understandably reluctant to see their own language relegated to a secondary role. But Eustace mentioned a second important factor — work-life balance. Japanese companies are famous for making employees work long, often unproductive hours. Things are improving under Abe, but more needs to be done. Systems to let employees take their work home with them — especially important for engineers and professionals who may do some of their best work alone — need to be strengthened.

Beyond that, a corporate culture that values output and results instead of input and visible effort is essential to work-life balance. Some Japanese companies, like snack-maker Calbee, have already shifted to this more effective corporate culture, but such transformations are hard, and many businesses are sticking to the old inefficient ways.

Japanese salaries are also probably unattractive for talented foreign workers. Since many Japanese companies still hire workers right out of college and retain them for the rest of their careers, starting salaries tend to be quite low. The reason is that workers can expect their pay to rise smoothly over the course of their careers. But skilled foreign workers are probably not that interested in sticking around at one company for three or four decades — they’re used to the international system of career advancement via job-hopping. In Japan, though, midcareer hiring is relatively rare, and seniority-based pay makes it harder to get a big raise by switching companies.

In other words, the real reason Japan is so unappealing to skilled immigrants is just the same thing that’s at the root of so many of its other problems — an inflexible, hidebound corporate system. That culture is changing slowly, and the country should probably do a better job of advertising the companies that use modern management techniques. But until the changes reach a larger percentage of the Japanese system, the country is going to have trouble attracting the best and brightest.

Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.Speech

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