1 Japanese Economy and the Rotation Scheme Acceptance of Non- highly-skilled Foreign Workers: Local Needs for Foreign Trainees Workshop 26 Reforming Migration Management between Industrialized and Emerging Economies in East Asia - An Overview and Policy Challenges- International Metropolis Conference 2013 Tampere Hall September 11, 2013 School of International Studies, Kwansei Gakuin University Kei SHIHO

2 1. Introduction -1  Why foreign trainees/ technical intern trainees? Sustaining local economy/ society Enhancing innovation and competitiveness The number of foreign residents and foreign workers in Japan Government of Japan has kept the policy that refuses to accept non- highly skilled foreign labour  Demand for/ Importance of lower skill: semi-skilled  Rapid increase of trainees/interns led by the Associations of Small and Medium sized Enterprises (SMEs)  Japanese descents

3 Table 1. Estimated number of foreign workers in Japan, except for the special permanent visa holders Source: Iguchi (2011a) p.182. Table 7-1, updated.

4 Table 2. Number of foreign trainees and technical intern trainees Note: Numbers are flow data unless explained. Source: By the author using Annual Report of JITCO and the data from Immigration Bureau.

5 2. The scheme of foreign trainees’ acceptance -1  Making international contributions on human resource development in developing countries through Japanese SMEs 66 types of job, 123 works  Target skill examination  Practically it would have an aspect of the shortage occupation list in some sense  Japan International Training Cooperation Organization (JITCO) has concluded Record of Discussion (R/D) with 12 countries as of March 2012 China, Indonesia, Vietnam, Philippines, Thailand, etc.

6 2. The scheme of foreign trainees’ acceptance -2 Before July 2010  9-12 months training and month intern (OJT); Training period: receiving allowance instead of salary After July 2010  As a result of the amendment of Immigration Law of 2009, the reform of Foreign Traineeship Programme and TITP took place upon receiving criticism including international fire  Protecting the rights of trainees/interns  The former trainees become interns and now they are covered with employment-related laws → New visa established  More responsibility for the Association of SMEs  Lecture on immigration and labour laws, etc.

7 2. The scheme of foreign trainees’ acceptance -3  Then, where are they in Japan? Trainees/interns’ regional distribution is affected only by the demand side of labour because they do not move after they come to the region

8 Source: Shiho (2010) p.8. Figure 1. Number of status change from trainee to technical intern (Fiscal Year 2008) They can be regarded that they entered Japan in 2007

9 Source: Shiho (2010) p.8. Figure 2. The rate of the trainees/interns to the local labour force population (2008)

10 Motivation 1 -1  What is the role of the acceptance of foreign trainees? The foreign trainees and technical intern trainees (TIT) play a role to make up the decline of youth workforce and maintain local economy and society

11 Motivation 1 -2  The number of incoming trainees supported by JITCO once peaked out in 2007 Economic downturn triggered by Lehman Shock and followed by the Technical Intern Training Programme (TITP) reform Since the start of the programme, number of acceptance had drastically increased despite of long recession after the collapse of bubble economy That fact implied that they were accepted by Japanese industries to make up the mismatch of labour market Why does the acceptance of trainees/interns at last hold responsiveness to the economic situation? How about the recent trend?

12 Motivation 2 -1  Difficulty of the management of non-highly skilled acceptance Selection and Programming Global competition of young labour acquisition  People do not move only by the wage gap between home country and host country  More rivals in Asia Such as Korea, Taiwan, Malaysia conclude bilateral labour agreement (MoU: Memorandum of Understanding) with various countries and accept term-fixed unskilled labour Rotation scheme: one of the measures to lower social cost  More and more propaganda activities in Japan to abolish the traineeship programme and introduce unskilled labour acceptance scheme

13 Motivation 2 -2  Economic integration viewpoint Just accepting young surplus labour from the developing countries around is not sustainable  Falling birthrate, development, popularization of higher education, etc. at those developing countries The “Human capital formation” acceptance scheme will enlarge the East Asian regional market and increase the region’s competitiveness  Also stimulates trade and FDI Aiming to make Asia tomorrow’s innovation centre

14 3. Analysis 1 Demand for the foreign trainees -1

15 3. Analysis 1 Demand for the foreign trainees -2 Table 5 ( ) Panel analysis; fixed effect model See also Tables 3 ( ) & 4 ( ) on the handout for comparison

16 3. Analysis 1 Demand for the foreign trainees -3  Correlation between the rate of trainees/interns to the number of local employee and the rate of high school new graduate entering local labour market turned to be positive ( ) from negative ( ) During recession period, the trainees/interns seems to be accepted by the regions to make up the mismatch of labour market During recovery period, as consequences of the positive buying of new graduates by large companies and the shrink of the new graduates’ volume, more competitive SMEs had to start accepting the trainees/interns

17 3. Analysis 1 Demand for the foreign trainees -4 Some of the export-oriented SMEs faced with difficulties after Lehman Shock and they made a decision to stop accepting the trainees/interns The others may again successfully hire the new graduates due to the economic slowdown Yet, it should be noted that even in the recovery period, non- export-oriented companies or industries have kept accepting the trainees/interns  Mismatch-driven  Japanese descents – trainees/interns relationship Until 2008, there was a tendency that both are accepted to the same prefectures Opposite since 2009  Industry (recently): agriculture, marine products.

18 4. Concluding remarks  Viewpoint of narrowing the middle- skill gap has to be recognized Both in developed and developing countries There are jobs that are not “high level” but necessary to maintain local economy and society  Just accepting the surplus young labour is not sustainable for the Asian region’s prosperity

19 Thank you for your kind attention !!