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  • Masa ISHII

The “Silver Economy” of Japan

It is well known that Japan has one of the oldest populations on earth, with over 36 million people over the age of 65. The median age is 48 – highest in the world. Almost 9 million people over the age of 65 were still part of the workforce in 2019, accounting for over 13% of all workers in Japan (“Older people account for record 28.7% of Japan’s population,” Japan Times, September 21, 2020). Combined with the low birth rate, the population “pyramid” of the 1950s has deformed into an urn shape by the 2010s and is expected to continue its deformation over the next thirty years (see Figure 1).


Figure 1. Age histogram of Japan, 1950-2045 (source: Statistics Dashboard of the Japanese government, https://dashboard.e-stat.go.jp/en/)

The aging of the Japanese society and its workforce has significant economic implications. As a result of declining numbers of young people and strict immigration policies, there is a shortage of manufacturing workers leading to declining production and curtailed innovation (“Japan’s Ageing Society,” European Parliament briefing, 2020). Health expenditures are claiming a larger percentage of the national budget each year while industries such as agriculture are suffering due to the aging population and the migration of younger people from rural areas to cities.

As the Japanese society is aging, the information systems used by the Japanese industry are getting outdated as well. As part of AZCA’s Digital Transformation (DX) practice, we conducted a “Digital Transformation in Japan” survey during the summer of 2020 in collaboration with Japan Management Association (JMA) Garage. One of the major findings of the survey was that the Japanese workforce is aging and is not well-prepared for DX. 66% of the companies that participated in the survey acknowledged that their workforce is aging and not well trained on digital tools. Only 3% of the companies stated that their workforce is relatively young and digital-ready, which is a troubling finding. (see Figure 2)

Figure 2. Aging and digital competency of the Japanese workforce (AZCA-JMA Garage DX Survey, 2020)

Conclusion

The term “Silver Economy” was coined to indicate the contributions of aging populations to the economy. In Japan, the aging workforce presents many challenges to the industry:

• Resistance to DX initiatives within companies • Skill gaps between younger and older employees • Slowing rate of innovation • Shortage of personnel for physically demanding factory jobs • Gradual loss of corporate knowhow due to retirements.

At the same time, the “Silver Economy” in Japan presents new opportunities for growth and prosperity. There are effective ways to introduce DX initiatives and improve productivity without alienating older employees. Ergonomic improvements and creative workplace enhancements could help accommodate the needs of older employees. IoT and automation initiatives help reduce the need for manual labor on the factory floor, allowing older employees to contribute through knowledge and wisdom instead of physical labor. Remote work allows employees with mobility issues to participate and contribute to the economy.

At AZCA, we believe that DX is a sound investment for companies that want to leverage the “Silver Economy.” An aging workforce is a valuable corporate asset. Companies that have sound DX strategies and execution plans have a better chance at attracting younger employees while retaining the wisdom and corporate knowhow of veteran employees.

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