THE FUTURE OF WORK IN JAPAN: ACCELERATING AUTOMATION AFTER - COVID-19 - MCKINSEY
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Transformation Practice
The future of work in
Japan: Accelerating
automation after
COVID-19
Digitization has played a key role in reducing the spread of the
virus and promoting a safe recovery. Now, it’s even more critical
to the country’s longer-term economic health.
by Maya Horii and Yasuaki Sakurai
© Just_Super/Getty Images
June 2020Japanese leaders have long promoted their operations and retrain workers to deliver
productivity improvements to drive economic more value. The McKinsey Global Institute (MGI)
growth. That has become an even greater priority estimates that Japan will need a 2.5-fold increase in
as the country’s low birth rates and rising life productivity growth over the next decade simply to
expectancy have reduced the domestic workforce maintain its recent GDP-growth rate.
(those aged 15 to 64 years) to 59.7 percent of the
total population. Even with efforts to hire more
women, retirees, and foreign workers to boost the The looming labor shortage
labor pool, Japan’s demographic shift threatens Even with those productivity gains, Japan is likely to
to stall GDP growth for the next decade. The key face a shortage in labor supply. To compensate for
to sustained economic growth is not just finding the challenge of a shrinking workforce, companies
workers but also transforming how they work have to deliver more. Prior to the pandemic, Japan
through automation. was on track to automate 27 percent of existing
work tasks by 2030. While that could replace the
That task has become a more urgent priority, as the jobs of 16.6 million people, it would still leave the
COVID-19 pandemic has forced an unprecedented country with a shortfall of 1.5 million workers in
drop in economic activity. The pandemic is also ten years (Exhibit 1). What’s more, the tight labor
accelerating a shift toward digitization to reduce the market could make it difficult for employers to free
spread of the virus while enabling more people and up people and resources to develop the new growth
processes to move online. That moment could prove opportunities that could emerge with automation.
to be a catalyst for Japanese employers to automate
Web
Exhibit
Exhibit 1 of
Even
Even with
with automation
automation and
and expanding
expanding labor-force
labor-force participation,
participation, Japan
Japan is
is likely
likelyto
face a shortage of 1.5 million workers by 2030.
to face a shortage of 1.5 million workers by 2030.
Projected change in labor demand, millions
2016 labor force 66.5
Jobs lost through automation (base scenario) –16.6
Growth in existing jobs +7.7
New-job creation +4.7
2030 net labor demand 62.3
2030 net labor force 60.8
1.5 million worker shortfall
Source: Japan Institute for Labour Policy and Training; O*NET OnLine; Statistics Bureau of Japan; McKinsey Global Institute analysis
2 The future of work in Japan: Accelerating automation after COVID-19Companies can get ahead of the trend. In 2017, MGI 56 percent of the work activities being done across
published research that found Japan’s potential Japan, enabling companies to lower costs and
for automation exceeded that of countries such as boost productivity despite a shrinking workforce
Germany and South Korea (Exhibit 2). Researchers (Exhibit 3).
estimated that automation could displace around
Exhibit 2
Japan leads
Japan leadsthe
theworld
worldin
in the
the potential
potentialfor
forjobs
jobsdisplaced
displacedby
byautomation.
automation.
Full-time-equivalent (FTE) jobs potentially displaced by 2030 by age group, millions
30
Japan 23
42
25 43 35
27 41 39 38
21
13 44 24 29 22
8 16
30
11 31 7 28
40
Share of 20 34
37 33
current work
activities 32
36
displaced by
automation¹ 20
2016–30, % 15 26 FTE jobs displaced, millions
17
14 120
9
6
3 18 60
4 25
10 15
2 5 15
12 19
1
5 1
0 20 40 60 80 100
GDP per capita 2030,
$ thousand (2010 real)
AgeExhibit 3
More
More than
than half
halfof
ofwork
worktime
timein
inJapan
Japanisisspent
spenton
onrepetitive
repetitive activities,
activities, two-thirds
two-
of which can be automated.
thirds of which can be automated.
Time spent on total Sample Automation
work activities in 2016, % occupations potential, %
Processing data Payroll officers
16 70
Transaction processors
56%
of activities and
Legal-support workers occupations
Collecting data 18 70
Mortgage originators are highly
susceptible to
automation
Predictable Production workers
22 67
physical work Machine operators
Unpredictable Gardeners
12 38
physical work Construction laborers
Stakeholder Personal caretakers
15 Salespersons 24
interactions
Applying 11 Artists 23
expertise Scientists
Managing 6 CEOs 11
others Project managers
Source: O*NET OnLine; Statistics Bureau of Japan; McKinsey Global Institute analysis
To achieve even minimum targets for such growth The next wave of digital innovation
will require a new mindset and approach to To prepare for a more automated future, leaders can
leadership. Employers should start with a focus accelerate their own efforts at digitization and take
on training and reskilling people to fill between 11 action in four key areas:
and 12 million new positions that Japan is likely to
need by 2030. Along with demand for more data — Commit to digital transformation at the top.
scientists, there will be a need for people with skills Managers cannot lead a revolution that they
in technology, analytics, and business to “translate” don’t understand. Senior executives need to
automation into innovation and growth. Employers enhance their own digital capabilities to drive
will also need to incorporate skills training into change from the top. That means learning about
the jobs of existing employees and work with the implications of digitization, machine learning,
government agencies to encourage more labor- and artificial intelligence (AI) for their businesses.
force participation while minimizing disruption, It also means going beyond workshops to see
especially to vulnerable populations. these technologies in action, perhaps through
4 The future of work in Japan: Accelerating automation after COVID-19Web
Exhibit 4of
Exhibit
To
To adapt
adapt to
to automation and compete
competein in the
thedigital
digital age,
age,employers
employersneed
needtotooffer
offer
skills
skills training
trainingand
andinnovation
innovationatatall
allcompany
companylevels.
levels.
Program initiatives by management level
Top executives Managers All employees
● “Go & See” visits to ● Digital assignments to ● Online programs to enhance
cutting-edge digital enable on-site training digital skills in different functions
companies and start-ups and development of best ● Peer coaching and designated
● Frequent workshops and practices “change agents” to drive digital
briefings to build ● Digital-skills training and practices throughout the
management capabilities briefings organization
Enhancing digital skills Reinforcing a culture of innovation
Capabilities accelerating value Elements of digital skills and practices
creation for customers
● Data-driven digital insights
● Innovative solutions ● Agile work styles
● Data/digital stacks ● Integrated customer experiences
● Partnerships/ecosystems ● Digital-enabled operations
● Digital organizations ● Design thinking
● Talent and corporate cultures ● IT systems
“Go & See” visits with start-ups or creative employees on the benefits of automation and
partnerships (Exhibit 4). find ways to foster growth while minimizing
disruption. To fill the urgent need for people
— Develop ‘business translators.’ Japan’s 2019 with these skill sets, the best option is often
strategy for AI points out the need to train to help talented employees develop more
250,000 people annually in fields such as data digital capabilities (Exhibit 5).
science and AI. What employers also need are
business translators, people who can match — Establish flexible work-style models. The need
that talent and technology with business to minimize contact during the pandemic has
priorities to help transform operations. Effective transformed work norms in ways that would
business translators understand industry trends otherwise take years to play out. After the
and market needs when measuring potential pandemic, organizations will need to operate
innovation. They help educate customers and with flexibility—both in where people work and
The future of work in Japan: Accelerating automation after COVID-19 5Web
Exhibit 5 of
Exhibit
‘Businesstranslators’
‘Business translators’play
playaacritical
criticalrole
rolein
indriving
driving change and aligning
change and aligning
technologies with business needs.
technologies with business needs.
Responsibilities of artificial- BUSINESS SKILLS
intelligence talent
Product
owner
Business translator
drives innovation
and digital adoption
by bridging technical
User- expertise with
experience “Business
translator” business needs
designer
Platform Data
architect scientist
Full-stack Data Visualization
TECHNOLOGY developer architect analyst ANALYTICS
SKILLS SKILLS
Data Workflow
engineer integrator
in when they do so. For Japanese companies, — Retrain and reskill the workforce. With
that will create new opportunities to recruit increased competition for talent and pressure
people who could not or would not work under to innovate, training and reskilling workers has
less flexible conditions. Potential recruits become a national challenge. Few managers
include parents with small children, people in have the resources to help workers adapt to
other countries, and those whose personal or rapidly changing technologies, especially in
professional priorities make it difficult to commit small and medium-sized enterprises. Workers
to a traditional office job. Digital innovation can also need more flexibility to go where their skills
further enhance flexibility by giving leaders and training are most in demand. Companies
new tools to foster culture, manage teams, and can partner with government agencies to create
safeguard cybersecurity (Exhibit 6). a more end-to-end approach that includes
With increased competition for talent
and pressure to innovate, training
and reskilling workers has become a
national challenge.
6 The future of work in Japan: Accelerating automation after COVID-19Web
Exhibit 6 of
Exhibit
A
A digital
digitalworkforce
workforceneeds
needs flexibility
flexibilityand
andaccountability.
accountability.
Practices to adopt for a digital workforce
Cultivate a one- Clarify Establish Accelerate Leverage digital Work in small, Raise
team culture, with decision- common test-and- tools to create agile teams to awareness on
frequent 1-on-1 making and platforms and learn cycles virtual team build effective cybersecurity
meetings with reporting lines technology by using pilot rooms that enable structures for risks and best
staff and customers by reducing across the testing to collaboration, continual practices, with
to enable isolation company: learn about communication, iteration and frequent
transparent and silos, shared goals and adopt and transparent adaption to updates to
communication making people require shared new working decision changing enhance
and collaboration accountable tools and models making conditions compliance and
and connected technology awareness
developing training programs and helping match recovering from the public-health crisis is both a
graduates with employers. challenge and an opportunity to accelerate the
automation that is critical to the country’s economic
growth. If leaders in the public and private sectors
can work together to prioritize action, Japan is likely
The COVID-19 pandemic illustrates how rapidly not just to recover but also to lead the way in the
the way we live and work can change. For Japan, next digital revolution.
Maya Horii and Yasuaki Sakurai are both partners in McKinsey’s Tokyo office.
Designed by Global Editorial Services
Copyright © 2020 McKinsey & Company. All rights reserved.
The future of work in Japan: Accelerating automation after COVID-19 7Copyright © 2020 McKinsey & Company Designed by Visual Graphics Japan www.mckinsey.com @McKinsey @McKinsey
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