Japan has reached a 0.5% economic growth from 1980 to 2017. This growth has been defined as one of the longest economic growths in a decade. This economic growth however, has massively contributed on the labor market, leaving Japan with one of the most extreme level of labor shortage in its history (Ducanes, 2008).

Labor shortage is a challenge in the economy whereby the employers are not capable or find it difficult to fill the vacancies of labor due to insufficient labor applying for the available labor vacancies. Labor shortages often occur on occupations with special requirements and in terms of functions and skills and in certain geographical locations having shortage of labor force. This economic quagmire can be seasonally experienced in agricultural industries and certain economic sectors in demand of special labor.

Japan is currently experiencing massive labor shortage and has reached its most extreme labor level shortage in more than forty years. The economy of Japan at the moment can offer 1.48 jobs for each person applying. This is the highest offer since 1974. The current situation is good news to the economy of Japan. Many people are entering the labor market due to the labor shortage that is forcing most of the companies in the country to hire people who were not looking for work previously.

As the economy is growing, the shrinking in the pool of workers becomes inevitable. Increased life expectancy and low birth rates in Japan creates an aging population and a workforce that is dwindling in Japan (Kingston, 2001).

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Causes of Labor Shortage

Labor shortages can be attributed to many reasons. One of the reasons for labor shortage is geographical one. If the economy of a country is booming and there is poor housing, the high cost of rent makes worker un attracted to the geographical location hence fail to pursue working in such geographic locations (Song, 2016).

High skilled jobs are another reasons for the labor shortage in a country. Occupations like doctors and nurses require long periods of training that significantly result in time lag when it comes to training of new workers hence leading to the labor shortage. Unattractive jobs such as those offered in the agricultural sector are hard to fill with labor especially in the technologically revolutionized nation. Such jobs get negative perceptions and become difficult to get potential laborers (Song, 2016).

Social prestige is another reason for labor shortage in economically devolved countries like Japan. Many people attach jobs to prestige rather than to wages it pays. Jobs such as plumbing, technicians and electricians are often perceived as not attractive hence do not result in labor attraction.

Fixed pay that is often implemented in the government public sector is a politically instigated method of payment that many people do not find appealing. Because of such reasons, the government may implement a prolonged pay freeze and scares most of the laborers from seeking such job opportunities therefore resulting in labor shortage. Finally, when the economy is at full employment, labor shortage will be highly experienced. This has been evident especially in sectors where macro economy is close to full employment.

How to Fix Labor Shortage and Reach Equilibrium Point

Restoring the equilibrium in the labor force is an essential aspect that the government of Japan should consider. One of the greatest ways of fixing the shortage of labor in the country is through marketing. The sectors that are experiencing labor shortage need to aggressively market their opportunities and give relevant token that would persuade the workers to join their labor force. Through marketing of job opportunities, the affected economic sectors should demystify the negative allegations there might be and restore positive attitude towards certain jobs in the economy. Another way of combating this problem is through education and training. Educational initiatives and training programs can help the economy in making a big difference in the challenge of labor shortage. Apprenticeship programs should be embraced to promote knowledge and understanding both in the vocational and corporate economic sectors. Finally, for the equilibrium to be reached, collaboration between all the sectors of the economy is a key. Lack of collaboration will increase the divide in the economy and further catalyze the problem of labor shortage (Kingston, 2001).

Effects of Labor Shortage on Economic Growth

Labor shortage in Japan has resulted in many people changing their jobs and their bosses during their career in a very high level. This habit of job-hopping goes against the          Japanese work culture and the companies’ higher graduates and retain them till they retire. Due to the shortage of labor force, the older workers are finding more opportunities because of the demographic factors such as faster aging society, reducing number of working age population and low birth rates. Because of the shortage issue, companies are facing shortages in their production capacities and often willing to extravagantly spend on labor that do not require extensive training. Due to the labor shortages, mot of the companies are opting for part time employees since the assets inflated bubble had busted in the early 1990s. Finally, labor shortage has placed most of the employees in a comfort zone as they argue that there is no compulsory retirement with their jobs since they feel that anyone can easily replace them. This has led to complacency and even laziness in the art of the available labor force (Kingston, 2001).

Relationship between GDP and Labor Market in Japan

The economy of Japan has been suffering from low GDP levels and falling prices for their products. The economy of Japan in the recent past has reported a negative figure in the average price inflation from 1997 to 2007. The underperformance of the economy of Japan can be attributed to temporary economic shocks and structural factors such as labor shortage. Due to decreased labor, most of the companies suffer and this results in their underproduction henceforth the lowered GDP rates (Song, 2016).



Ducanes, G., & Abella, M. (2008). Labour shortage responses in Japan, Korea, Singapore, Hong Kong, and Malaysia: A review and evaluation. Bangkok, Thailand: ILO.

Kingston, J. (2001). Japan in transformation, 1952-2000. Harlow, UK: Longman.

Nagata, M. L. (2004) Labour contracts and labour Relations in early modern Central Japan. London, UK: Routledge.

Song, J. (2016). Inequality in the workplace: Labor market reform in Japan and Korea. New York, NY: Cornell University Press.