Japan, once known as a manufacturing powerhouse, has seen its economic status decline, with its GDP falling to fourth place globally, now trailing behind Germany. This shift is attributed to a change in how Japanese businesses operate, focusing on expanding non-regular employment instead of investing in workforce development. Koichi Iwamoto suggests that while Japanese workers maintain a strong work ethic, the lack of investment in human capital and increased reliance on non-regular workers have undermined productivity.
Despite Japanese companies doubling the labor effort compared to German firms, their efficiency remains stagnant. Germany, known for having low working hours among OECD countries, surpasses Japan in GDP due to its higher labor productivity. In Japan, productivity issues are linked to the increasing proportion of non-regular employees, who now make up 37.1% of the workforce, affecting accountability and knowledge transfer.
Japan’s labor productivity per capita and per hour trails by about 1.5 times compared to Germany. The decline in productivity growth since 1995 coincides with Japanese companies relocating high-productivity manufacturing operations overseas, reducing local output. In manufacturing, Japan’s productivity stands at only two-thirds of that of the U.S. and Germany.
Contributing to this issue is Japan’s decline in investment in employee development. Training and skill-building budgets have been consistently lowered, with Japan spending considerably less on workforce development compared to other advanced countries. This approach reflects a corporate environment where employees are seen more as fixed costs needing reduction rather than valuable assets deserving investment.
Leadership also plays a significant role in this decline. Many Japanese corporate leaders cling to old business models and practices instead of fostering innovative approaches and empowering their staff. This outdated mindset quashes the potential of highly capable young employees, whose talents are underutilized once they enter the workforce, turning vibrant individuals into average companypeople, as described by Takeshi Kojoh in the analysis of Japan’s economic challenges.
Meanwhile, Germany provides potential lessons for Japan. Despite its smaller size, Germany’s GDP now surpasses Japan’s due to its higher productivity per person and hour. German workers succeed through efficient practices, balancing work and extensive leisure time. To address its productivity puzzle, Japan must decipher the secrets behind Germany’s high performance and reconsider its approach to labor and leadership if it hopes to reclaim its former standing.
by MagazineKey4532