Illustration by Phil Couzens
Recent statistical data detailing the current global demographic shift indicates that Japan is by far the most severely affected nation with both a rapidly aging and shrinking population. This dramatic demographic shift comes as no surprise to veteran Japan market analysts and has spawned a number of studies focused on the future of the nation’s workforce. In recent years, one particularly foreboding term that has come into regular use is the “Year 2007 Problem.”
The “Year 2007 Problem” (nisen-nana-nen mondai) came about as a term designed to describe the anticipated retirement of the Japanese baby boomer generation from 2007 onwards. This generation consists, by definition, of those born between 1947 and 1949 and comprises a significant percentage of the labor force. Including also those born in 1950 and 1951, there are a total of 10.7 million people in the baby boomer generation, with 8.2 million belonging to the labor force in 2006—more than 12 percent of the entire labor force.
Nisen-Nana-Nen Mondai: What Was It All About?
The original forecast, made by many market experts, predicted that a large percentage of these baby boomers would retire when they reached their 60th birthday between 2007 and 2009. The expected retirement wave, in combination with the aging and shrinking population, was predicted to be the cause of severe problems on a micro- and macroeconomic level. For one thing, a large percentage of the potential retirees were knowledge experts; for another, the looming labor shortage was a cause for worry in terms of human resources in a country not known for encouraging mass immigration.
Indeed, even now, if no measures are taken to increase the number of seniors and women working in corporate Japan, the working population will see a dramatic decline. According to a white paper by the Cabinet Office, the labor force population that numbered 66.57 million in 2006 will decline to 42.28 million by 2050. And, by 2030, a decline of more than 10 million is feared. The outlook for Japan is indeed gloomy, even by international standards, as shown by the percentage change in the working age population covering those in the 15–64 years of age demographic (See Figure 01).
Another important factor that comes into play when considering the impending retirement of aging employees (often the most seasoned experts in their areas) is the distinctly Japanese business culture approach toward managing expertise within large organizations. Often based primarily on tacit know-how, these roles, and the subtleties associated with them, are difficult to encode or somehow store in a database to be applied to a new hire. Because Japanese companies tend to focus on the direct transfer of know-how via personal communication and interaction, a company’s discreet knowledge base is hardly ever externalized, that is, translated from tacit to explicit knowledge.
Moreover, the need for systematic and explicit documentation of knowledge is far less important in companies with a traditional Japanese employment system—lifetime employment and the seniority system—than in companies with a higher turnover, as is the case for many companies in Europe and North America. Know-how in Japanese companies is mainly passed on personally—during working hours and during social occasions in the evenings via “nomunication” (Japanese nomu = to drink)—and intrinsically in the context of on-the-job training. Of course, the transfer of tacit knowledge and its externalization require time, and thus the simultaneous retirement of several experts creates a significant problem.
