Fourth Valley

FV think tank

 
NO.2     2020/Aug.

Market Analysis of Foreign Talent Market in Japan Column No. 2: Why do foreign talents come to Japan? A consideration of the importance of economic benefits

[Why do people look for work beyond borders?]

In TV programs featuring foreigners in Japan, foreigners are often asked why they came to Japan. In many cases, tourists are the subjects of the interviews, and the answers such as "Because I like Japanese food and culture" or "Because I'm interested in Japanese anime and manga" are common.

So, why do foreigners who come to work in Japan choose the country out of the 196 countries in the world?

Before limiting the story to Japan, let's take a look at the migration of talent around the world.

According to the "International Migrant Stock" published by the United Nations, the top 15 migrant-producing and migrant-receiving countries combined, the number of people migrating is shown in Graph 1.

The broad trend is that GDP per capita is moving from smaller to larger countries, with the largest gap moving from India to the U.S. (27 times) and the smallest from Kazakhstan to Russia (1.1 times), with an average gap in GDP per capita of about 8 times.

As illustrated in Graph 1, physical distance also plays a role in the number of migrants, but proximity alone does not cause the movement of talent across borders.

The question of whether there are sufficient economic benefits for immigrants is an important factor to consider when discussing migration.

 

<Graph 1: Flow of global migration from country to country>

Source: United Nations Department of Economic and Social Affairs, Population Division, "International Migrant Stock" (2017)

The same can be said for Japan. The previous column mentioned that the nationalities of foreign workers coming to Japan is becoming more diverse and the percentage of Chinese nationals is decreasing.

China's economy has been growing rapidly since the early 2000s, with GDP per capita increasing 40 percent in the five years leading to 2019. In contrast, Japan's GDP per capita only increased by 10 percent over the same period. For those living in China, the benefits of staying in their home country instead of going to Japan to work is increasing each year because their home country is growing at a brisk pace.

In addition, China's coastal areas are experiencing impressive economic growth; in Shanghai, for example, GDP per capita reached $53,000 as of 2018. The GDP per capita of Japan for the same period was $44,000, so it is likely that China's major cities are already more economically prosperous than those in Japan.

Thus, the economic benefits can't be missed when talking about the movement of talent across borders.

 

[Economic disparity among regions in Japan]

As mentioned earlier, China's coastal economy is growing to the point where it is approaching that of other developed countries in Europe, the United States, and Singapore. On the other hand, in regions such as Guizhou and Yunnan provinces, the GDP per capita is less than $10,000, indicating the growing economic disparity in the country.

Did you know that economic disparity among regions exists in Japan as well?

 

<Graph 2: Starting salary for college graduates (2018)>

Source: Ministry of Health, Labour and Welfare

 

For example, when looking at the average starting salary for college graduates, there is a staggering JPY 45,500 difference between Tokyo, which ranks first, and Okinawa, which ranks last.

There is a big difference between big cities and rural areas in the minimum wage that applies not only to college graduates, but also to part-time workers and technical interns. If one works 6 hours a day, 20 days a month, the monthly wage in Tokyo is JPY 121,560, while in Aomori, that amount would be JPY 94,800, which is a difference of about JPY 27,000.

The economic benefits for foreign workers vary greatly depending on where they work, even in the same country.

 

<Graph 3: Minimum wage comparison>

Source: National Minimum Wage Rankings 2020

 

Rural areas are particularly troubled with talented individuals moving to other areas and are facing a shortage in the workforce due to low birthrates and an aging population. In recent years, an increasing number of local governments and companies have been trying to solve these problems by accepting foreign employees.

However, in order for a foreigner to be satisfied with his or her treatment and to work in any particular region for a longer period of time, it is very important to compare where the person has lived and where he or she will work, and to imagine whether there are sufficient economic advantages for that person.

As we saw at the beginning, people are not willing to move across borders simply because of proximity if there are no other benefits. For example, it is difficult for a company in Tokyo to hire a foreigner living in Beijing who is looking for a job, or to bring a foreign student who has been attending a university in Osaka for four years and working part-time to rural areas. (Rarely do you hear someone say, "I really want to live in Japan because I love Japanese culture, regardless of where it is," because of internet-based cross-cultural experiences and subcultural consumption in this day in age.)

Both local governments and companies can do better at solving labor shortages and conduct successful recruitment activities more efficiently by targeting foreign talent living in areas with ample economic advantages.