August 24, 2015 by iMFdirect

By Giovanni Ganelli and Naoko Miake

Take a walk in Tokyo, and you will see the sign ???????, or “Staff Wanted”, outside many restaurants and convenience stores. These businesses often find it impossible to recruit the workers they need. According to recent statistics, for each job seeker in Japan applying to work as a waiter, there are more than three available positions. Home helpers and long-term caregivers are equally in demand. If you want to work as a security guard, you can choose from around five openings, and for some positions in the construction business the job-to-applicant ratio is over six.

Japan’s labor shortages are the result of both a shrinking population—which limits the overall pool of workers—and skill mismatches. The reduced supply of labor is one of the factors bringing down medium-term potential growth, which the International Monetary Fund estimates at just 0.6 percent. Labor market shortages are also bad for short-term growth, because they reduce the effectiveness of the monetary and fiscal stimulus that the authorities are using to try to boost demand.

Japan’s shortages are large from an international perspective. The ratio of job vacancies as a percentage of the labor force population—an indicator of labor shortages—stood at 3.2 percent in 2013 in Japan.  The same figure is 1.1 in Germany and 2.5 in the United States.