Human Resources Development According To Diversified Working Styles Mhlw S White Paper On The Labor Economy 2018 Japan Labor Issues Volume 3 Number 15 June 2019

The Ministry of Health, Labour and Welfare (MHLW) issued its white paper, Analysis of the Labour Economy 2018, on September 28, 2018. The topic of this 70th white paper is “Human Resources Development according to Diversified Working Styles.” The white paper states that promoting investment in human resources, as well as in capital, is important for Japan, a nation grappling with labor supply restrictions brought by a declining birthrate and aging society. It suggests that promoting “work style reform” that allows diverse human resources to select flexible working styles in accordance with their individual circumstances and raising the labor productivity of each individual will be essential for the nation’s sustainable economic growth. Japan’s low labor productivity Japan ranked the lowest among the G7 nations in both nominal and real labor productivity in average of five years from 2012 to 2016. Its real labor productivity was less than 45 dollars per labor input, or 70% of the figures of France, Germany, and the United States, which were at high levels. However, the white paper points out that real labor productivity is sluggish among all of the G7 nations. As for the rates of increase from 1996 to 2000, those for Germany, the US, France, and the United Kingdom were around 2%, while that for Japan was also above 1.5%. Thereafter, real labor productivity showed a lower increase internationally from 2006 to 2010, a period that included the financial crisis sparked by Lehman Brothers’ bankruptcy. From

US, France, and the UK stood at under 1%, while that for Japan was also just above 0.5%. The white paper suggested that investment in people as well as in IT capital should be promoted in order to improve labor productivity. Declining investment in skills development The white paper points out that the percentages of skills development expenditure of enterprises that make up GDP (an estimate of the amount spent for off-the-job training [OFF-JT], not including that for on-the-job training [OJT]) are falling in each country; however, Japan’s percentage is at a conspicuously low level (Figure 1). In fact, from

US, 1.78% for France, 1.20% for Germany, 1.09% for Italy, 1.06% for the UK, and 0.10% for Japan. In the cases of Germany, the UK, and Japan, the percentages have continued to decrease since the period from 1995 to 1999. Compared to the period from 1995 to 1999, the period from 2010 to 2014 shows decreases of 0.14 percentage points for Germany, 1.17 percentage points for the UK, and

states that there are concerns that human capital is not being sufficiently accumulated among Japanese workers and, as a result, this will be a factor that hinders improvements in labor productivity in the long term. Skills development raises sales and productivity Regarding the effects that expenditure for skills development have on enterprises’ performance, the white paper points out that expenditures for Off- JT and support for employees’ self-development (jiko keihatsu) have a positive effect on statistical significance vis-à-vis enterprises’ performance Key Topic Human Resources Development according to Diversified Working Styles MHLW’s White Paper on the Labor Economy 2018

Labor Issues vol. 2, no. 10, contains a detailed explanation of skills development and career formation in Japanese enterprises.Trends

in terms of the following year’s sales and labor productivity. It further points out that support for self-development is likely to be more effective than Off-JT when the impact of effects are compared. Additionally, noting the results of a JILPT analysis, Survey of the current state and challenges of human resources development and skills development (2017), the white paper indicated that enterprises with relatively more OJT-related initiatives have among them a higher percentage of enterprises that recognize that human resources development leads to better productivity. Systematic OJT is effective for improving productivity Furthermore, the white paper classified enterprises into two types according to specific OJT activities—“enterprises in which OJT is proceeding well and workplace productivity is improving” (Type A) and “enterprises in which OJT is not proceeding well and workplace productivity is not improving” (Type B)—and compared the implementation rates for individual OJT activities (the top part of Figure

With regard to specific implementation rates, Type A has higher rates compared to Type B for most of the activities. This is particularly conspicuous in the rate for “assigns work on a higher level” to employees, which is 15.0 percentage points higher for Type A. Following are “gives advice on how to do a job,” whose rate is 14.1 percentage points higher, and “broadens the scope of a job” of employees, whose rate is 13.8 percentage points higher. Of the options, the exception was the percentages of enterprises that selected “puts employees in authentic working situation and train them through experience,” which were largely the same for both types (the bottom part of Figure 2). From these results, the white paper states that OJT without clear planning appears to have little relation with improved productivity. On the other hand, OJT may lead to higher productivity when systematically conducted (i.e., assigning work on a higher level in stages), directly linked to specific

to OJT.

U.S.A. France Germany Italy U.K. Japan

(Rate of change:%) Source: Prepared based on data estimated by Professor Tsutomu Miyakawa (Gakushuin University) using the Cabinet Office’s National Accounts of Japan, JIP Database, and INTAN-Invest database. Note: The figure shows changes in the five-year averages of skills development expenditure’s share to real GDP. Skills development expenditure in the figure refers to the amount for OFF-JT, which indicates training and other expenditures both inside and outside the company, and does not include expenditures needed for OJT. Figure  1. International comparison of the skills development expenditure share to GDP (gross domestic product)

Puts employees in authentic working situation and trains them through experience Actually shows how the job is done Gives advice on how to do a job Shows the correct attitude for performing a job Explains the knowledge and skills that need to be learned Has employees understand the company's ideals and founder's philosophy Indicates the job or role to be aimed for Assigns work on a higher level Broadens the scope of a job Entrusts employees with guidance to juniors Provides opportunities to review work Gives manuals related to work Creates education/training plans for individual employees Clearly shows the company's policy on the human resource development Assigns a full-time training officer Gives counseling on career vision Assigns work on a higher level Gives advice on how to do a job Broadens the scope of a job Actually shows how the job is done Has employees understand the company's ideals and founder's philosophy Indicates the job or role to be aimed for Creates education/training plans for individual employees

Enterprises in which human resources development has productivity-raising effects, and that view OJT positively Enterprises in which human resources development does not have productivity-raising effects, and that do not view OJT positively (%) Implementation rate of each activity related to OJT

Activities with large gaps in implementation rates (“Effective” – “Not effective”; percentage points) Source: Independent tabulation by Office of Counsellor for Labour Policy Planning of MHLW, based on Survey of the current state and challenges of human resources development and skills development (questionnaire for enterprises), JILPT Research Series no.172, 2017. Notes: 1. The figure on the top indicates the implementation rates of activities concerning OJT for enterprises responding that human resources development has/does not have effects in raising workplace productivity and that OJT is proceeding well/not well.

in which human resources development has effects in raising workplace productivity and OJT is proceeding well, and those in which human resources development does not have effects in raising workplace productivity and OJT is not proceeding well.

Figure  2. Activities of enterprises in which OJT is proceeding well and productivity in the workplace is improving

operations in the form of counseling and advice, and encouraging employees to take on a new task challenge by broadening the scope of work. “Fine-tuned” human resource management What differences in human resource management approaches exist between enterprises in which the skills of various human resources are being fully demonstrated and those that face challenges in achieving such demonstration? The white paper examines activities targeting regular employees as revealed in JILPT’s Survey on advancement of diversified working styles and human resources management (Figure 3). According to the survey, enterprises are actively taking initiatives that include “measures against long work hours and those for mental health care,” “support for combining work and childcare,” “promotion and raising wage commensurate with skills and outcomes,” and “improvement of fairness and acceptability of personnel evaluations.” Roughly 90% of enterprises classified as “enterprises in which the skills of various human resources are being fully demonstrated” are addressing these items. Particularly large differences in the initiatives of both enterprise types are seen in “enhancement of skills development opportunities” (10.7 percentage points, the same applies to the following), “elimination of unreasonable disparities in treatment among employees (between men and women, between regular and non-regular employees, etc.)” (10.5), “assignments and transfers based on employees’ wish” (10.4), “support for combining work and medical treatment” (10.3), “support

Enterprises in which the skills of diverse human resources are fully demonstrated Enterprises that face challenges in terms of the full demonstration of the skills of diverse human resources (%) Measures against long work hours and mental health measures Support for combining work and childcare Promotion and wage increases commensurate with skills and outcomes Promotion and wage increases commensurate with skills and outcomes Improvement of fairness and acceptability of personnel evaluati ons Measures to facilitate interpersonal relationships and communication in the workplace Selection and promotion of superior human resources Sharing/permeation of management strategy information and goals in departments/workplaces Support for combining work and nursing care Enhancement of skills development opportunities Support for combining work and medical treatment Encouragement of taking paid vacation Clarification of job description in writing at the time of empl oyment Assignments/transfers based on employees’ wishes Elimination of unreasonable disparities in treatment among empl oyees (between men and women, between regular and non-regular employe es, etc.) Support for return to work for people who have left employment or are on leave for reason of childcare, nursing care, medical treatme nt, etc. Shortening of work hours and flexible work styles Expanded discretion in execution of dutiesSource: Independent tabulation by Office of Counsellor for Labour Policy Planning of MHLW, based on Survey on advancement of diversified working styles and human resources management (questionnaire for enterprises), JILPT Research Series no.184, 2018. Note: The sample size of responses concerning human resource management in enterprises in which the skills of diverse human resources are fully demonstrated was 1,305 for activities targeting regular employees (including restricted regular employees). Figure  3. Implementation rates for employment management in enterprises in which the skills of diverse human resources are fully dedemonstrated (activities targeting regular employees)