From China to Japan, the UK to the US, wherever you look, there’s a labour shortage.
We have COVID, mental health issues, aging demographics, and the skills gaps as just some of the problems companies are trying to navigate while finding employees at this time.
In the UK, out of 32.5 million workers, a million are missing from the workforce. Young men are not working as they fear contracting COVID, are experiencing long-COVID, or are re-educating themselves. To make matters worse, Brexit has meant a greatly reduced overseas talent pool.
Companies, as well as whole industries, are fighting for the same talent, adding pressure to increase salaries, and causing companies all kinds of internal equity problems. Talented professionals have always earned more when changing companies unless they are regularly promoted at their current employer. Now the situation is more pronounced and it’s become a real ‘opportunity cost’ in lost salaries for tenured employees.
What does this all mean? Well for starters, professionals are now asking for a 15% or sometimes even 50% salary increase depending on the role and location. At McKinsey, Bain, and BCG (MBB), in the first year after an MBA, an MBB consultant can expect to take home $200,000 including bonuses and benefits. The starting salary has gone up $10,000 from $165,000 to $175,000 just in the last year.
In Japan, even prior to COVID, there was a shortage of tech workers. The Ministry of Economy, Trade and Industry (METI) estimated in 2019 that the country was short 220,000 IT workers with the figure predicted to grow to as high as 790,000 workers by 2030.
During the pandemic, and with the help of Uber Eats and Netflix, consumers have become more accepting of new technologies forcing companies to speed up the development of similar products. As digitalization spur on, there will be an abundance of administrative workers while simultaneously a shortage of technical workers. This skills gap is real and it’s growing.
With a declining birthrate and aging demographic in China to restaurants closing across the US, this problem is spanning the globe and across many industries.
Mental Health
Since the onset of COVID, the past two years have been underlined by a mental health crisis. According to the medical journal The Lancet, mental disorders account for 18% of all health issues and are expected to cost economies $6 trillion a year by 2030. Of the 411,000 Britons that have left the workforce between February 2020 and November 2021, more than half left due to depression, anxiety, learning difficulties, and other mental health issues. In the US, two-thirds cited mental health as their reason for leaving their employer.
In Asia, the situation isn’t much different. 80% of China and Hong Kong-based respondents in AXA’s 2022 Study of Mind Health and Well-being indicated they had experienced high levels of stress, anxiety, or depression within the last year.
What’s clear is with a high percentage of workers leaving the workforce, it’s put additional strain on organizations. It’s not uncommon for individuals to be stretched vertically or horizontally (bigger scope/remit) or be in double-hatting or even triple-hatting roles with the same salary. It’s simply not sustainable in the long run.
No Simple Solution
This has led to the great resignation and companies are trying everything they can to retain talent while trying to hire from competitors. Talent acquisition teams are constantly under the microscope to meet targets but the reality is that there’s no simple solution. In Japan, recruitment fees are now commonly increasing to 40% with some exceptions, for specific tech talent, up to 100% or even 200% of the candidate’s annual salary. The candidate’s salary in itself is increasing at a high clip but not all companies can pay at the top level and even if they can, it’s only a matter of time before the competition catches up.
Companies have been trying for years to utilize talent overseas either through a shared service model or by moving them to Japan. The shared service model has limited impact as there aren’t many Japanese speakers overseas and at the time of writing, the Japanese border is still closed to non-Japanese citizens and residents. With the border being closed for more than two years and counting, Japan Inc has destroyed the trust it has built with overseas workers. With the world competing for the same talent, how will Japan attract the future workforce? With the unemployment rate in Japan below 3% and with 1.13 jobs available per applicant, how will your company compete?
Japan Unemployment Data
About Horton International Japan
Makana Partners supports mid-senior search based in Japan, on a contingent or retained basis.
We offer market intelligence and strategy to identify, source, and secure top talent. Using our technology and our expansive network, we are able to introduce the best talent for your organization considering skills, experience, and culture fit. Throughout the search, we will give feedback on the reputation of your company, how the process can be improved, and align expectations between stakeholders and against market trends.
For talent, we understand the importance of your career. As such, we will advise on internal as well as external opportunities across multiple industries, for the short and long term so you can make the right decisions. We consider your passion and life objectives when introducing opportunities.
To learn more about how we enable organizations with the world-class talent we introduce or how we can support your career development, please visit us at: http://makanapartners.com/
References
- Where are Britain’s missing million workers? – https://www.bbc.com/news/business-60039923
- £150,000 starting salaries as firms fight for staff – https://www.bbc.com/news/business-59949697
- McKinsey, Bain, BCG Increase MBA Consulting Salaries For 2022 – https://www.businessbecause.com/news/mba-jobs/8030/mckinsey-bain-bcg-mba-consulting-salaries
- Even after pandemic, Japan’s labor market faces shortages and mismatches – https://www.japantimes.co.jp/news/2021/08/16/business/economy-business/japan-labor-market-shortages-mismatches/
- Pandemic-driven depression is driving labor shortages around the world – https://fortune.com/2022/01/21/covid-pandemic-driven-depression-world-labor-shortage/
- Public mental health: required actions to address implementation failure in the context of COVID-19 – https://www.thelancet.com/journals/lanpsy/article/PIIS2215-0366(21)00199-1/fulltext
- Two years on, how is Asia’s workforce coping with the mental health fallout of the pandemic? – https://www.humanresourcesonline.net/two-years-on-how-is-asia-s-workforce-coping-with-the-mental-health-fallout-of-the-pandemic
- Japan’s job market showed signs of healing before omicron’s spread – https://www.japantimes.co.jp/news/2022/02/01/business/economy-business/december-2021-unemployment/
- Unemployment rate and employment data in Japan – https://take-profit.org/en/statistics/unemployment-rate/japan/
