[Leading Point ] Avatars, robots and AI: Japan turns to innovation to tackle labour crisis

June 9, 2024

Secretary-general Hiroyuki Ishige reassured the public that the multibillion-dollar global showcase would be ready on time. Ishige’s confidence may be genuine, but the fact that he had to address the question at all is the result of a crisis far beyond his control. The Expo — a dusty, barren site with little yet built — is the most high-profile victim of a national shortage of construction workers. A shortfall of workers in the world’s fastest-ageing economy is profoundly affecting the way the government, companies and people operate now and think about the future. Even the most iconic features of Japan’s famous service economy are in jeopardy. Central Japan Railway ended the beloved food trolley on the Tokyo-Osaka bullet train in October, while across the country vending machines are increasingly left unfilled for days. “Japan’s labour shortage is occurring regardless of whether the economy is doing well or not,” said Shoto Furuya, chief researcher at the Recruit Works Institute. “We are beginning to fall short of essential services on which we rely on to maintain people’s lifestyles and social infrastructure.” RWI estimates that the country will have a labour shortage of 11mn people by 2040, with the number of people above age 65 — who already account for nearly 30 per cent of the population — expected to hit its peak in 2042. In the past decade, Japan has relied on female and elderly workers in the face of strict restrictions on hiring overseas workers. But Naruhisa Nakagawa, founder of hedge fund Caygan Capital, said from this year this would no longer be enough and the country’s labour force would start to dwindle. How Asia’s largest advanced economy responds to this labour crisis will be closely watched, not least by its neighbour China, whose population has also begun to shrink. One way Japan is tackling the demographic challenge is by introducing avatars, robots and artificial intelligence to the workforce in key sectors:

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Japan’s construction industry has long struggled to hire workers despite attempts to attract more women and young workers by trying everything from raising wages and offering more fashionable work uniforms to installing portable female toilets at building sites. Still, the number of people employed in the sector has declined 30 per cent to 4.8mn workers from its peak in 1997, according to the Ministry of Land, Infrastructure, Transport and Tourism. The ministry data also shows that only 12 per cent of construction workers are aged under 29, while about 36 per cent are over the age of 55. So severe are the sector’s staffing problems that it was given five years to prepare for new labour rules coming into force in April that would curtail overtime for construction workers and truck drivers. As the reality of these shortages have hit, the estimated cost of the Expo has doubled to more than $1.6bn, as contractors are forced to pay more to entice workers. Some countries, fearing soaring costs and delays, are scaling back their presence. Japan’s great national showcase could be directly harmed by its labour shortages, diplomats warned. For Daniel Blank, the chief executive of start-up Toggle, the crisis presents a business opportunity. Blank travelled from New York to Japan last year to promote the use of industrial robots to automate the most labour-intensive process for construction companies: the assembly of reinforcement bars. Last year, Toggle raised a combined $1.5mn investment from Tokyu Construction and Takemura, another Japanese construction group. “Japanese companies are scouting for new technology all over the world,” Blank said. “It’s really all driven by the shortage issue. With labour becoming more expensive and harder to find, you need to find new ways to deliver construction projects.


Great Topic from Financial Time