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HOME NRI JOURNAL Takahide Kiuchi's View - Insight into World Economic Trends :
Overhauling the Technical Intern Training Program — Raising the Latent Potential of the Japanese Economy Also Possible


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Takahide Kiuchi's View - Insight into World Economic Trends :
Overhauling the Technical Intern Training Program — Raising the Latent Potential of the Japanese Economy Also Possible

Takahide Kiuchi, Executive Economist, Financial Technology Solution Division

#Market Analysis

#Takahide Kiuchi

Dec. 08, 2023

The government’s Advisory Panel of Experts tasked with debating the ideal methods for bringing foreign laborers into Japan compiled its final report on November 24, 2023. The report proposes replacing the current Technical Intern Training Program with a new system, which would broadly allow workers to change jobs within the same industry, something which had been prohibited. Going forward, the current system will be revamped in line with the proposals in this report. Given the numerous problems that were present under the previous incarnation of the Technical Intern Training Program, including its failure to adequately respect foreign trainees’ human rights, there is no doubt that the system is in need of an overhaul.

Easing restrictions on “job place transfers” a major sticking point

The purpose of the system will shift from the traditional aims of “making international contributions by developing human resources” and “transferring technical skills to developing countries”, to instead focusing on “securing and developing human resources”, and in keeping with this shift, a proposal to change the system’s name to the “Development and Employment System” is also being reviewed.
At the final stage of formulating the report, the discussion grew heated over the conditions for allowing workers to “transfer” to other companies during the three-year Technical Intern Training Program. The proposal made in October by the Secretariat of the Advisory Panel of Experts recommended that those who wish to change jobs be allowed to do so within the same industry—which was not permitted under the previous system—on the condition that they had worked for the same company for more than one year and had passed the basic level tests for Japanese language proficiency and technical skills.
However, the version of the proposal made in mid-November contained an exception, in the form of an interim measure, that the transfer restriction period may be extended to “a maximum of two years” on the condition that trainees would receive better treatment in their second year in their specified field of employment.
Underlying this course correction were mounting concerns among companies, and even within the ruling party, that if workers changed jobs too soon, the investments in skills development would not come to full fruition, and that talent would flow out to urban areas.
In response to this, the Labor Lawyers’ Association, a lawyers’ group which advocates for workers’ rights, issued an urgent statement, pointing out for instance that the restriction thus far on “transfers” has created a breeding ground for human rights violations and calling for no unnecessary requirements for “transfers”.

Allowing the freedom to change jobs will help protect trainees’ human rights and improve workplace environments

As the Labor Lawyers’ Association pointed out, up to now, the restriction on job changes has in some sense undeniably become a hotbed of human rights violations for foreign trainees. From this standpoint, it’s vital to loosen this restriction as much as possible, and that should be the core of this overhaul to the Technical Intern Training Program. Although the Technical Intern Training Program was nominally supposed to be about “making international contributions by developing human resources” and “transferring technical skills to developing countries”, in actuality it would very much seem to have been used as a means of securing cheap labor. Furthermore, it’s been said that the system has led to human rights abuses including low wages, long working hours, and in some cases even violence against employees. The prohibition on trainees from changing workplaces for three years in principle has likely contributed in some way to these human rights infractions. Last year saw 9,006 trainees who disappeared to escape human rights violations and became undocumented. Significantly easing the transfer restriction would be the first step toward strengthening the protection of trainees’ human rights. While the question of whether to change jobs or not would come down to a trainee’s wishes, workers who are fully satisfied with their treatment by their companies in terms of skill acquisition, salary, working hours, and so forth probably would not look in the first place to go to another company in the middle of the training program. Granting trainees the freedom to change jobs conceivably lead to greater protection of human rights and better work environments for trainees through market mechanisms. The improvement of trainees’ treatment in the wake of this system overhaul would place a burden on companies, but perhaps those companies should look upon this development as the cost of taking measures to address labor shortages. Yet the growing burden on companies resulting from this revision to the system would likely also need to be considered to some degree. The previous system enabled trainees, upon completing their three-year training program, to obtain a residency status for foreigners who have certain expertise or technical skill, called “Specified Skilled Worker (i),” without having to take a test, and continue working at the same company. However, under the new system, passing technical skills and Japanese language tests will be a requisite for earning this status. Therefore, to continue to make use of foreign labor, companies will be required to help trainees acquire such technical skills and Japanese language proficiency. It’s also being considered to hold companies responsible for bearing a certain amount of the costs that trainees must pay before arriving in Japan. To ensure that this overhaul of the system doesn’t present an excessive burden for companies accepting foreign workers, the specific design of the system will need to be carefully considered going forward.

Are concerns about human talent outflow from rural to urban areas being exaggerated?

Incidentally, it would also seem that the concerns that this easing of the transfer requirements will lead human talent to leave rural areas for urban centers in pursuit of higher wages are not well founded. To be sure, the minimum wage and actual wage levels do vary from region to region. However, to some extent that disparity corresponds to differences in the cost of living among different regions, and having high wage levels alone probably won’t be enough to drive human talent out of rural areas toward cities.
The monthly active job openings-to-seeker ratio—which indicates how many job vacancies are available per job seeker in a given month—was at a nationwide average of 1.3 in October 2023, and the regional disparity wasn’t that great. The active job openings-to-applicants ratio in Tokyo, where wage levels are high, was at 1.18, which is not especially low compared to the national average, and that can hardly be considered an environment in which retaining talent is quite easy. On the other hand, by region, the one with the lowest active job openings-to-applicants ratio where talent is easiest to retain was the more distant prefecture of Hokkaido, at 1.11.
The final report issued by the Advisory Panel of Experts on November 24 took away the heavily criticized tightening of the transfer requirements. This means that, with the exception of certain fields, trainees who have worked at the same company for one year in principle will be able to change jobs under certain conditions.

Making Japan, and its companies, an appealing choice for trainees is key

Japan’s economic environment has changed considerably in the 30-year period between 1993, when the Technical Intern Training Program was created, and now. Against the backdrop of declining economic growth potential, nominal wage levels in Japan have barely changed over the last 30 years. Moreover, with the yen having depreciated over the past 10 years now, Japanese wage levels have lost a substantial amount of their appeal for foreign workers. For that reason, there’s been a growing trend of foreign trainees from Asia heading to countries like South Korea instead of Japan.
In this context, in order for Japan to secure foreign trainees for its labor force, it will surely be essential for Japanese companies to make efforts to robustly support these workers in acquiring technical skills.
The system for taking on trainees will have to be revised to give priority to making Japan and Japanese companies appealing to trainees and give full consideration to those trainees in terms of human rights and fair treatment. The crucial factor at that time will likely be adopting, to the greatest extent, “market mechanisms” such as freedom of transfer as we have discussed.

In terms of the requirements for allowing trainees to change jobs or to obtain status as a “Specified Skilled Worker (i)”, the idea of requiring trainees to pass a certain level of the Japanese Language Proficiency Test is being discussed. However, mastering Japanese while working is no easy matter, and considerations should be made to ensure that this does not pose an excessive burden for trainees, and furthermore, for companies as well.
Rather than simply requiring trainees and foreign workers to master the Japanese language and blend into Japanese society, it’s probably also important for governmental agencies and so forth to expand their available foreign language services, thereby actively including foreigners in society and promoting coexistence.
Such coexistence between Japanese and foreign persons is essential when it comes to building greater acceptance of foreign labor, and it’s also important to provide language-related support and offer assistance for educating the children of foreign workers. In this respect, the national and local governments surely have a major role to play.

The Technical Intern Training Program overhaul should also seek to boost Japan’s economic growth potential over the medium-to-long-term

It’s likely also important to view this overhaul to the Technical Intern Training Program as a means of restoring the growth potential of the Japanese economy—that is to say, as an economic growth strategy.
Currently, there are discussions about overhauling the Technical Intern Training Program and rolling out a new system that could be run in an integrated manner with the Specified Skilled Worker system that was launched in 2019. The idea being considered is that after a three-year training period, trainees who pass a certain level of trade skill test and Japanese language proficiency test would be granted a five-year status as a Specified Skilled Worker (i). This would aim to retain highly-skilled foreign labor in a more stable manner over the long term.
Meanwhile, this spring, it was decided to expand the framework of industries that are able to offer Specified Skilled Worker (ii) status, which is given to those who have acquired more advanced technical skills. Specified Skilled Worker (ii) status has no restrictions on the duration of stay, and it also allows workers to bring family members over from their home countries, which arguably means that this system is essentially very similar to an immigration system. There are discussions underway about coordinating the revised trainee system with Specified Skilled Worker (i) certification, but surely it would also be important to provide trainees with a pathway to Specified Skilled Worker (ii) status as well. The trainee system should thus be revised so that it can fully play the role of a gateway to the long-term retention of highly-skilled foreign labor.

Now, a public debate is probably needed over expanding the Specified Skilled Worker (ii) system (which in some ways resembles an immigration system), but retaining highly-skilled foreign workers and allowing them to bring their families over would serve to grow the country’s labor supply in the long term, raise the birth rate, and provide other benefits, and I would venture to say that it could be one important means of enhancing the potential growth of the Japanese economy.
An overhaul to the Technical Intern Training Program must protect the human rights of trainees as its top priority, but going even further to integrate this revision with growth strategies rooted in a long-term perspective for raising Japan’s economic growth potential would surely also be an important concept here.

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