Can India Meet Japan's Technical Worker Needs?

Anthony P. D'Costa (Professor, Comparative International Development, University of Washington, Tacoma, USA)

The recent visit of the Indian Prime Minister to Japan marks a turning point in Indo-Japanese bilateral relationship in a larger Asian and global economy contexts. The big item on India's agenda has been its desire for Japanese recognition of India's nuclear use for peaceful purposes. But there is another issue lurking at the background, which is of equal significance. This is the availability of highly trained technical professionals for the booming information technology and other related high technology sectors. We are close to the infamous 2007 Japanese report, which announced that Japanese baby boomers will retire en masse from the workforce. As an ageing society Japan is confronted with dilemmas that other affluent societies face. The question is how will Japan pay for its healthy, elderly, non-working citizens seems a question that many have asked but few have advanced any meaningful, workable solutions. Clearly in addition to the usual bilateral needs between India and Japan, India could support Japanese demographic challenges by offering well-trained technical professionals, while Japan takes a deeper and more long-term interest in the Indian economy and contribute to India's development.

Japan's strength is in the information and communications technologies (ICT). It is a world leader in telecommunications, embedded software, consumer electronics, automobiles, and other manufacturing industries. However, because of low-wage competition from and technological learning by other Asian countries, Japanese producers must constantly innovate and move up the value chain. Good technical training and investment in research and development may not be enough since ICT is increasingly converging to some global standards, which Japan has not been following since it set many of the standards in industries it dominates. But costs of manufacturing are also falling. Not only must Japan keep abreast of global innovations and technical standards but it must also expand the technological frontier. For this it needs high quality scientists and engineers in large numbers. Most data on Japan's supply of talent shows that this is a significant bottleneck as fewer younger people are interested in such training. Consequently, Japan must start exploring technical and other professionals from countries such as India, China, and the Philippines.

The problem is Japan cannot assume workers will want to come to Japan. Various forms of global shortages in information technology industries have created an unprecedented competition for talent. Non-OECD economies send a large number of people abroad. However, a handful of them send educated and technically trained people. The former Soviet Union and India had the largest numbers of expatriates with tertiary education - 1.3 and 1.0 million respectively. The US is attractive for students because of excellent, post-baccalaureate science and engineering programs in large, well-endowed university systems, financial assistance for students, professional opportunities, and, until recently, a very receptive attitude toward foreign students based on the broader liberal political culture. English-speaking students find it easy to adjust to the American social environment. It is evident that Japan is not an attractive destination for foreign students in spite of its large economy.

On the other hand, India has its own share of problems. First the rapid growth of the Indian IT industry based on US demand has tightened the supply of labor. This is visible with a very high labor turnover sometimes exceeding 30% and skyrocketing salaries. Second, it suggests that India itself is going to face labor shortages. Some estimates made by McKinsey shows that by 2010 India is likely to face a shortfall of half a million IT workers, both engineers and business process staff combined. Third, India's highly skilled talent is being snatched by western especially American multinationals, leaving the less well-trained talent up for grabs for smaller Indian companies and Asian markets. So Japan's ability to pay good salaries to foreign IT professionals may not be sufficient to attract highly skilled people. Furthermore, in the East and South East Asian region countries such as Taiwan and Singapore, both quite proficient in the IT sector are themselves facing labor shortages, with similar demographic developments of low birth and low death rates.

Given this global dynamic it is clear there is considerable competition for global talent. With Japan as the second largest IT market, it is in a difficult position, unable or perhaps unwilling to attract foreign talent on a large scale. Yet it continues to experience worker shortages and face competitive pressure in its high technology industry. Not surprisingly, both Kitakyushu and Fukuoka in closer proximity to the East Asian region are scrambling to attract Chinese and other Asian students to its universities, laboratories, and companies. For Japan as a whole the problem is large and demands considerable foresight, creativity, political will, and society-wide recognition that business in Japan cannot be business as usual. In the information-driven economy, Japan must address its demographic challenges by harnessing the expertise of foreign talent and encouraging Japanese women to be part of the ICT workforce. Technical and entrepreneurial skills from the expatriate communities can be mobilized for domestic development and at the same time the export of skilled labor from other countries be accommodated by Japan. In the twenty-first century global competition demands flexibility and technological capacity. This means that high-value service providers such as doctors, computer scientists, geneticists, managers, accountants, engineers, chip designers, etc. will be recruited globally to exploit emerging opportunities. Labor shortages in many ageing societies will dictate the direction and magnitude of the flows of technical talent. But thus far neither India seems to find Japan attractive nor does Japan seem to be ready for this inevitability. Such status quo must change as the stakes for both are high: for Japan to rejuvenate its high tech economy with fresh, globally-oriented talent and for India to obtain Japanese manufacturing know-how to sustain the high growth and widen the benefits of growth to more Indians.

This is based on the author's field research as an Abe Fellow in 2005 and 2006 and the longer research article "The International Mobility of Technical Talent: Trends and Development Implications." All sources used in this essay have been duly acknowledged (see www.wider.unu.edu).