Condition for the Use of Foreign Human Resources: Make Skill Assessment Consistent with Japanese Workers

Fellow, RIETI

The Amended Immigration Control Act will come into force in April. The most significant aspect of the new system is the creation of a "specified skills" status of residence. Acceptance of foreign workers will be expanded in 14 specified industrial fields such as the construction and manufacturing sectors with workers granted the "specified skills" status of residence.

According to the Employment Status Survey conducted by the Statistics Bureau, laborers in agriculture, manufacturing, and construction fell by 2.26 million (14%) over the 10 years from 2007. During that time, Technical Intern Trainees in those industries increased by 0.1 million (56%; Ministry of Justice data). As a result, the percentage of Technical Intern Trainees among laborers in those industries doubled to 2% of the total workforce. Ninety percent of Technical Intern Trainees are employed at worksites with less than 300 employees. It is therefore certain that the ratio of trainees at small and medium enterprises is even higher.

However, the serious labor shortage cannot be tackled just with Technical Intern Trainees, since trainees are required to return to their home countries after the training ends and since there are limits on the number of trainees that worksites can accept. That is likely why the expansion of immigration under a new system was considered.

Although many details of the new system's operation are still unclear, it is likely that many of the foreign workers gaining the specified skills status of residence (Specified Skilled Worker) will do so either through a change of status after completing three years of technical training, or the re-entry of former Technical Intern Trainees. If the new system is seen as a continuation of the Technical Intern Training Program (TIIP), the author is concerned that two problems that occurred systematically with the TITP will be repeated under the new system as well.

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One is the double standard regarding skill levels. There seems to be an understanding among the Japanese people and business owners that the specified skills status of residence will be a method of opening a pathway to the acceptance of foreigners who will engage in unskilled labor. On the other hand, the government has explained that the program is meant to accept foreigners with "skills requiring considerable knowledge or experience." Thus, there is a significant gap between these two specific ideas. This misunderstanding could be caused by different opinions on how to rank the skills of persons who have completed technical intern training and those of Specified Skilled Workers.

What is the actual level of skills required of Specified Skilled Workers? Let us examine the Trade Skill Test and Occupational Classification.

The "skills requiring considerable knowledge or experience" that Specified Skilled Workers should have are verified through a skills assessment exam conducted for each work category (73 categories in 14 fields). In principle, the exams are to be conducted overseas, however, persons who have completed at least three years of technical intern training and passed the practical test on a Grade 3 Trade Skill Test are exempted from the skills assessment exam (see the figure below).

Figure: Conditions for becoming a Specified Skilled Worker
Figure: Conditions for becoming a Specified Skilled Worker

The skills assessment exams to be conducted overseas are expected to be the same level as a Grade 3 Trade Skill Test. In other words, having the skills equivalent to a Grade 3 Trade Skill Test, regardless of whether one has completed technical intern training, is a requirement for becoming a Specified Skilled Worker that is defined as possessing considerable skills.

What kinds of skills are evaluated on a Grade 3 Trade Skill Test? Skill Tests, which are a national testing system, have a variety of levels including, in order of highest to lowest skill level required: Advanced, Grade 1 to 3, and Basic (trainees only). Grade 3 is defined as, "Level of skill that should normally be held by starting-level skilled worker." Grade 3 was originally intended primarily for people who completed vocational training, or high school students taking vocational courses, but since 2016 the number of Technical Intern Trainees taking Grade 3 tests has increased rapidly.

In the case of Technical Intern Trainees, if they take a Grade 3 Trade Skill Test and pass the practical test in the 3rd year of training, they can transfer to the 4th year of technical training or change their status to the specified skills status of residence. Since the specified skills status is expected to be a status of residence in "specialized and technical fields," Specified Skilled Workers who have passed the practical test on a Grade 3 Trade Skill Test or equivalent skills assessment exam are to be classified as workers in specialized and technical fields.

On the other hand, in terms of the Japan Standard Occupational Classification, which classifies occupations according to the knowledge and skills needed to perform work, how are persons who hold a Grade 3 Trade Skill Test qualification valued? In agriculture, forestry, fisheries, manufacturing, and construction, which are the main industries that will accept Specified Skilled Workers, laborers who hold a Grade 3 Trade Skill Test qualification are classified as agriculture, forestry, and fishery workers, manufacturing process workers, and construction and mining workers; they are not regarded as professional or engineering workers.

Professional and engineering workers in these industries are persons engaged in development and managerial/supervisory work. The skills required of persons engaged in managerial/supervisory work are, according to the classifications of the Trade Skill Test, equivalent to Grade 1 and Advanced. In order to obtain a Grade 1 Trade Skill Test qualification, it normally takes four years of practical experience after passing Grade 3.

Specified Skilled Workers likely have a certain level of skills, derived either from practical experience in the same occupation overseas or from a minimum of three years of technical intern training in Japan. However, as long as their skills are held up to the definitions of the Trade Skill Test and Occupational Classification, is it really appropriate to treat Specified Skilled Workers, in terms of status of residence, as human resources in specialized and technical fields? Shouldn't the skills of foreigners be ranked, under both the Technical Intern Training Program and the new system, so that they are consistent with standards applicable to all workers?

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The other problem is wage levels. Compensation for Specified Skilled Workers is required to be equivalent or higher than that of Japanese workers. However, as with Technical Intern Trainees, Specified Skilled Workers have no academic background requirement for their status of residence. In other words, since a standard education level (high school educated etc.) is not technically a requirement for the types of work they are to engage in (whereas for all Japanese employees in the same position there is an assumption, but not a written requirement, of at least junior high school, high school, or university education), so the problem is where to set the minimum educational requirement for the purpose of comparison.

With respect to the wages of Technical Intern Trainees, thus far it has been common to set wages around the minimum wage in regions and industries where wages are considerably lower than the starting rate of a high school graduate and the average for laborers in each industry, and wage raises have rarely been given during the training period.

One justification given for the lack of promotion or wage increases has been that improvement in skills deserving of wage raises were not observed during the training. However, this reasoning cannot be applied to persons who become Specified Skilled Workers after technical intern training. After all, by passing a Trade Skill Test or skills assessment exam, Specified Skilled Workers are confirmed to have higher knowledge and experience than Technical Intern Trainees who perform basic work. Consequently, the wages of Specified Skilled Workers should be set at a wage level corresponding to higher skills, and keeping them at a minimum wage level not much different from Technical Intern Trainees is unacceptable.

Furthermore, for a different reason, under the new system changes could occur in pay rates that have been static up to this point. Since Technical Intern Trainees' freedom to transfer to a different workplace is limited, they had no choice but to accept the low wages offered by a training company. Specified Skilled Workers, however, are free to choose where to work, within the scope of their status of residence. If it is easier to change workplaces, workers could, for example, accept offers from other companies that value their skills more highly, or demand raises as a condition of remaining with their current employer.

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Since the creation of the Technical Intern Trainees Program, a variety of measures have been taken to ensure that companies comply with labor-related laws and to remove corrupt intermediaries. Nevertheless, the fact remains that Technical Intern Trainees' skills are not valued appropriately and they are treated in a manner that is not commensurate with their skills. One explanation for this situation is the fact that with insufficient data having been collected and made public to evaluate matters such as Technical Intern Trainees' wages and the productivity of host companies, there was little incentive for making improvements.

The Comprehensive Measures for Accepting and Living Together with Foreign Human Resources, which were announced in December 2018, stipulate that "a revision of statistics [is to be carried out] to make it possible to grasp matters such as the employment status and wages of foreigners [who have come to Japan] with the purpose of working." If the use and analysis of statistical data sheds light on the skills and treatment of foreign workers as well as the performance of companies using these systems, it will be possible to evaluate the new system based on objective evidence.

Productivity should be the main focus of any evaluation. If productivity does not improve, and the hiring of Specified Skilled Workers results in companies becoming more labor-intensive, with decreased labor productivity and stagnation of capital investment, the new system will have to be revised in the not-so-distant future.

>> Original text in Japanese

* Translated by RIETI.

March 13, 2019 Nihon Keizai Shimbun

May 24, 2019