Priorities for the Japanese Economy in 2021 (January 2021): Using the COVID-19 Crisis as a Chance to Revive the Japanese Economy

Inequality between Long-Term Foreign Residents in Japan and Japanese People: Focusing on the Unemployment Rate

LIU Yang
Fellow, RIETI

Even though the number of foreign tourists visiting Japan has fallen more than 99% because of strict entry restrictions due to the novel coronavirus (COVID-19) pandemic, the number of foreign nationals living in Japan as of June 2020 was down only 1.6% compared with the end of the previous year, before the onset of the COVID-19 pandemic. The number of foreign workers to whom residence permits were granted in recognition of their technical and humanities-related knowledge and international business operations skills increased by 6.2% (16,996 people) (Note 1). A reference document used at a meeting of relevant ministers on the "acceptance of and coexistence with foreign workers" stated as follows: "In the future, after the novel coronavirus infectious disease outbreak has been contained, it is expected that the economic situation will be restored and the number of foreign visitors to Japan will rapidly increase. Therefore, it is necessary to continue making every possible effort to develop an environment for welcoming foreign workers so that the necessary foreign workers can be welcomed appropriately."

One underlying factor is the Japanese government's stance of actively accepting "necessary foreign workers" over the long term. However, we cannot ignore the inequality arising between foreign workers and Japanese citizens, given that some foreign workers live and work in Japan over a long period of time. In this column, I will examine the inequality that exists between long-term foreign residents in Japan and Japanese citizens, focusing on the unemployment rate in particular (Note 2). Amid the rising unemployment rate due to the COVID-19 pandemic, there have been many media reports about the serious unemployment problem faced by foreign residents. This is not a temporary problem caused by the COVID-19 pandemic but has already existed for an extended period, and I believe that there is significant inequality between long-term foreign residents and Japanese citizens.

Inequality between Immigrants and Native Populations in Other Countries

As inequality between foreign residents and native populations has attracted attention in many countries, academic and policy studies have been vigorously conducted. A foreign study found that compared with native populations, immigrants experience a longer period of unemployment, have a lower probability of finding a job and lower expectations for lifetime employment (Mooi-Reci and Muñoz-Comet 2016). A wage inequality between immigrants and native populations is also widely observed (e.g., Barrett 2016). According to the OECD International Migration Database, the unemployment rate among immigrants is 1.5 times as high as the rate among native populations on average among the OECD member countries (Note 3). One major cause of inequality is considered to be a low level of education among immigrants (Schoeni 1998, Painter 2001, Ferrer 2006).

Present Situation in Japan

Officially, the Japanese government has indicated its stance of not promoting active acceptance of immigrants and has enforced a strictly selective approach to accepting foreign nationals into Japan. In principle, Japan accepts foreign workers whose academic achievement or job skills are higher than the threshold levels and who have secured a full-time job in the country before immigrating to live there. Furthermore, only people of Japanese descent have the chance to be allowed to live in Japan as long-term residents while working as unskilled laborers (Note 4). Until now, sufficient research has not been conducted as to whether inequality has arisen between long-term foreign residents and Japanese people. JILPT (2012), one of the few previous studies on this matter, calculated the average unemployment rates for all individual categories of foreign residents and for Japanese citizens based on published data from the Census Survey in 2010. In this article, I will conduct a more in-depth analysis using all individual data collected through the Census Survey (Note 5).

According to the analysis results, on average, the percentage of people with university or graduate school degrees in the working-age population is higher among long-term foreign residents than among Japanese people. The percentage of people engaged in jobs in technical or professional fields is 1.5 times among foreign residents with university degrees as much as among their Japanese equivalents. This is apparently attributable to the Japanese government's policy of mainly accepting highly skilled foreign workers over the long term. Even so, the analysis showed that on average, the unemployment rate was higher among long-term foreign residents than among Japanese residents. Moreover, according to the results of analysis comparing samples of foreign nationals who have stayed in Japan for five years or longer and Japanese people, it was found that the probability of losing a job is higher among foreign residents even if controlled for factors such as age, academic achievement, residence location, and family composition. For example, with respect to foreign men who have stayed in Japan for five years or longer, it was found that the unemployment rate is 4.0 percentage points higher among those who are of Korean descent, 8.1 percentage points higher among those who are of Chinese descent and 2.6 percentage points higher among those who are of American descent than among Japanese men under the same conditions in terms of age, academic achievement, residence location and family composition.

Causes and Challenges

The analysis for this paper found that even though foreign workers staying in Japan already have a job in the country when they arrive (or when they obtain qualifications to work in the country), those who have stayed in Japan over a long term face a higher probability of losing their jobs than Japanese people. Indeed, regarding work opportunities for foreign residents in Japan, according to the OECD Indicators of Talent Attractiveness (Note 6), Japan is at the very bottom among the 35 countries surveyed in terms of the quality of opportunities for highly educated workers (Note 7). Given the limited opportunities in Japan, a foreign resident is likely to have a lower chance of being reemployed once he/she has lost a job than a Japanese person.

One possible cause is that as foreign residents' adaptability to the Japanese labor market is low on average, they experience more difficulties, including unfamiliarity with Japanese employment practices and language barriers, than Japanese people when they look for a new job after becoming jobless. Moreover, as was pointed out by Holbrow & Nagayoshi (2016), when employed by a Japanese company, foreign workers are likely to be assigned exclusively to tasks related to foreign business. In other words, for foreign residents, there tend to be few opportunities for climbing the career ladder through a job-rotation system, unlike in the case of Japanese employees. As a result, foreign workers' job skills developed during their working career may be more easily replaced compared with Japanese employees' skills, and this may be the reason why foreign workers are more likely to lose their jobs when companies implement redundancies.

The Comprehensive Measures for Acceptance and Coexistence of Foreign Nationals (revised in fiscal 2020), which were authorized at the meeting of relevant ministers in July that was mentioned at the beginning of this article, included support for "stable local employment" of foreign workers provided through Public Employment Security Offices (Hello Work). If Japan adopts a broad range of policy measures that provide appropriate reemployment to foreign workers in advanced professional and technical fields, including the above support measure, that will not only mitigate the unemployment problem faced by long-term foreign residents in Japan but also be beneficial for securing workers with global business skills in the future.

This paper used questionnaire data from the Census Survey in 2010 by the Ministry of Internal Affairs and Communications. We received a subsidy under JSPS Grant-in-Aid for Scientific Research 19K13733.

January 8, 2021
  1. ^ "Number of Foreign Residents as of June 2020," a press release issued by the Immigration Services Agency under the Ministry of Justice in October 2020.
  2. ^ Foreign technical intern trainees are excluded from discussion in this paper because they are not allowed to bring their families to Japan and because they have no access to the Japanese labor market.
  3. ^ According to the most recent 2017 data. However, Japan is presumed to be not included in the average as the column for Japan in the country-by-country table is empty.
  4. ^ While foreign unskilled laborers other than those of Japanese descent are allowed to work in Japan for a fixed period of time, they are not allowed to bring their spouses or other family with them, or to change jobs. Therefore, they are not recognized as ordinary residents.
  5. ^ For the analysis, a large set of data covering all information regarding nationality, education level, and work status is necessary. The Census Survey in 2015 does not include information on the education level. Data from the Census Survey in 2020 are not yet available for use.
  6. ^
  7. ^ Data Briefs: How do OECD countries compare in their attractiveness for talented migrants? (Migration Policy Debates 17) (MPD No. 19, May 2019). This edition presents the results of the first edition of the OECD Indicators of Talent Attractiveness, developed by the OECD with support from the Bertelsmann Stiftung (
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March 16, 2021