How should labor productivity be improved?

The Yomiuri Shimbun

The Yomiuri Shimbun The administration of Prime Minister Shinzo Abe has been prioritizing “work style reform” as one of its signature policies, aiming to improve the nation’s labor productivity. Experts recently spoke with The Yomiuri Shimbun about such issues as what labor productivity improvement policies are required for the Japanese economy, and labor productivity’s limitation as an economic index.


Workers’ skills need boost to compete globally

Tsutomu Miyagawa / Prof. at Gakushuin University

Labor productivity indicates how much value can be added per unit of labor input, and is a yardstick of economic development. The additional value can increase through technological innovation in particular. Toyota Motor Corp.’s Prius hybrid car, for example, is the fruit of research and development.

Japan once boasted of its manufacturing industry’s high productivity. But with China and South Korea closing in from behind, Japan’s business model of pursuing efficiency has lost its luster. Also, new, highly productive facilities have been transferred overseas since the 1990s, making them no longer able to contribute to domestic productivity.

In the service industry, the IT revolution in the latter half of the 1990s brought along such firms as Google and improved productivity. During this period, Japan lagged behind due to its excess capacity.

Introducing equipment can raise labor productivity, but doing so recklessly may lead to excess capacity. Since the bursting of the economic bubble in Japan, overcapacity has put stress on corporate management, blocking pay increases.

Currently, the discussion is primarily about rectifying long hours of work, but that is not enough if we are to improve productivity. The expertise of individuals needs to be built up. Germany is ahead of Japan in labor productivity because it has many skilled workers. We should create a system that helps foster workers who can compete globally.

---Tsutomu Miyagawa

Graduated from the University of Tokyo Faculty of Economics in 1978, and joined the Japan Development Bank (now the Development Bank of Japan). Having been a fellow at Harvard University and an assistant professor at Hitotsubashi University, he is now a professor at Gakushuin University. His fields of expertise are macroeconomics and the Japanese economy.


Change approach to draw out innovations

Yasushi Shimizu / Management consultant

Labor productivity in Japan is said to be low by international standards, but the talent of the Japanese is far from being low.

In the Survey of Adult Skills by the Organization for Economic Cooperation and Development (OECD), conducted among men and women aged 16-65 and released in 2013, Japan displayed the highest average proficiency in literacy and numeracy.

In each company, improvement in productivity is the responsibility not of employees, but of top executives.

In the era when markets expanded against a backdrop of population growth, companies boosted sales by producing more goods and services in less time and at lower cost. This does not apply, however, to the modern Japan facing population decline. That is why sales at supermarkets would not necessarily double even if all the cashiers handled customers at twice the normal speed.

Top executives should change their way of thinking in a bid to substantially transform the value added in business.

They need to break free from such systems as simultaneous hiring and homogeneous personnel evaluations so they will be able to draw on human resources capable of creating innovative ideas. It is also important to prepare an environment in which employees are able to spare part of their working hours for activities unrelated to their current work. Doing the same things will never result in new ideas.

---Yasushi Shimizu

Graduated from the Keio University Faculty of Law in 1986, and joined Andersen Consulting (now Accenture Plc). After serving in positions such as representative director of a building materials trading firm, Shimizu founded two companies in 2009 and 2010 that provide consulting on corporate turnaround and management strategy.


Talent of elderly, women vital to economic growth

Hideo Kumano / Chief economist at Dai-ichi Life Research Institute

Japan has become a society in full-fledged population decline, making it no longer realistic to hope for economic growth through population increase. But tax revenue needs to be secured to cover the social security costs that are ballooning as the country ages.

The only path for the country’s economic growth is improved labor productivity that boosts the output per worker.

The key to improving productivity lies with the effective use of elderly people and women. Currently in Japan, talented elderly people and women are not given chances to sufficiently work despite the labor shortages. A system needs to be prepared for deftly employing their skills and further enhancing their talent through education.

It is also essential to change society through technological innovations such as artificial intelligence and self-driving cars. If more steps such as deregulatory measures are taken in a bid to utilize technologies from overseas, it will also lead to improvement in productivity.

And yet, the gap in labor productivity among countries is rather insignificant because productivity in dollar terms is influenced by exchange rate fluctuations and also because the percentage of government spending included in GDP varies from one country to another.

In fact, Japan’s labor productivity is low vis-a-vis its GDP, but it is modestly improving on a company basis.

---Hideo Kumano

Graduated from the Yokohama National University College of Economics in 1990, and entered the Bank of Japan. Kumano joined the Dai-ichi Life Research Institute in 2000. Kumano has been chief economist at the institute’s economic research department since 2011. His fields of expertise include financial and fiscal policy and economic statistics.

(From The Yomiuri Shimbun, March 6, 2018)Speech

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