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5/26/2006
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Brain Drain Feared In Japan

Retirement in '07 of the first wave of baby boomers may force industry and government to embrace foreign labor.

The year 2007 has special meaning for Japanese companies, since that's when the first of the country's baby boomers will reach retirement age. Nearly 10 percent of the present labor force is set to leave the work force by 2009, a prospect that is raising concerns over a manpower shortage and a shrinking of the skills and knowledge pool in the manufacturing industries. The so-called "year 2007" issue looms as a crisis for a country that takes pride in its manufacturing expertise, but it may crack open the door of Japan's labor market to foreigners.

In the United States, the term baby boomers is commonly applied to people born between 1946 and 1964. In Japan, it refers only to those born between 1947 and 1949. Japan's Law for the Stabilization of Employment of the Aged stipulates a minimum retirement age of 60. Based on that law, most companies and public offices require employees to retire when they reach the age of 60. That's next year for people born in 1947.

An amendment that took effect just last month may buy the industry some time, since it extends the employment term to age 65. But the pending knowledge gap still must be addressed.

The tendency to suspend hiring activity during downturns has caused a generational imbalance in the makeup of the work force at many Japanese enterprises. At small to midsize tech companies, in particular, there is often a deficit of employees who would be considered to be in their prime. When the boomer engineers begin leaving the work force in large numbers, there will be too few younger veterans left to fill their shoes.

Manufacturers consider the accumulated skills and know-how of their work force a primary source of their competitiveness. So it's no surprise that in a survey on the year-2007 issue, more than 30 percent of the responding companies expressed concern about the smooth handoff of skills from retirees to their younger counterparts. Respondents were especially concerned about the knowledge gap for professional and production jobs requiring complex skill sets.

Companies are not standing idly by. Hitachi launched a project in 2001 to document the skills that veteran engineers have mastered during their years on the job. Matsushita established an in-house monozukuri (craft work) college in April through which veteran engineers pass on skills to their younger colleagues. And companies like NEC, Sony and Toshiba are in rebuilding mode, with plans to hire twice as many new engineering grads next year as they do in a typical year.

Top industry executives have also gone before the Council on Economic and Fiscal Policy, which Prime Minister Junichiro Koizumi chairs, to make the case for opening Japan's industry to more foreign talent by relaxing the restrictions on offshore hires.

Meanwhile, veteran engineers who fear they will miss the work may not have to leave the industry, although they might have to leave Japan. Companies elsewhere in Asia are courting older Japanese EEs, eager to tap their know-how. Engineering specialists in memories, LCDs and communications are finding the doors open at companies in Taiwan, South Korea and China. Japan's government and industry may bemoan the brain drain, but some Japanese boomers may find the opportunity too good to pass up.

Baby boomers have always been trendsetters. Even in retirement, they may find themselves changing the way Japan works.

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