Japan is projected to face a significant labor shortage by 2035, with an estimated deficit of 3.84 million workers. This translates to 17.75 million hours of unfilled labor daily.

The forecast, based on a report by Persol Research and Consulting Co. and Chuo University, predicts that the labor shortage will expand by 1.85 times compared to 2023. This is primarily due to a reduction in individual working hours as a result of work-style reforms and measures aimed at improving work-life balance.

Despite the anticipated labor shortage, the overall workforce is expected to increase from 67.47 million in 2023 to 71.22 million in 2035. This increase is attributed to more women, elderly workers, and foreign nationals entering the labor market. The number of foreign workers is projected to grow significantly, from 2.05 million to 3.77 million.

The Impact of Work-Style Reforms and Aging Workforce

However, average annual working hours per person are expected to decline by 8.8 per cent by 2035, largely due to an ageing workforce and the implementation of work-style reforms.

To mitigate the labor shortage, the report highlighted the need for reforms, including adjusting tax and social security systems to prevent reduced working hours, encouraging side jobs, and boosting productivity, particularly through the integration of generative artificial intelligence.

This situation is reminiscent of the labor shortage faced by the United States during World War II, which led to significant changes in the workforce, including the increased participation of women and minorities.

Technological Advancements and the Future of Work

In the context of the global economy, the labor market is undergoing significant changes due to technological advancements and automation. The rise of artificial intelligence (AI) and automation has led to concerns about job displacement.

However, experts argue that while AI and automation may replace certain tasks, they also create new job opportunities and can boost productivity and efficiency. This is similar to the industrial revolution in the 18th and 19th centuries, which led to the displacement of certain jobs but also created new industries and job opportunities.

Furthermore, the COVID-19 pandemic has accelerated the shift towards remote work and digital transformation, leading to changes in the labor market and work arrangements.

This shift has also highlighted the importance of digital skills and lifelong learning. In response to these changes, some companies and governments are implementing measures to support workers and facilitate the transition to new work arrangements.

For example, the Biden administration in the United States has proposed the American Rescue Plan, which includes measures to support workers and businesses affected by the pandemic.