As the race for high-skilled immigrants begins, does Japan want to compete?

As the race for high-skilled immigrants begins, does Japan want to compete?

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Rakuten’s CEO Hiroshi Mikitani has noted that Japan could bring more engineers from abroad

If you have spent any time reading tech blogs today, you’ve likely stumbled across Mary Meeker’s/KPCB’s annual report on internet trends. It’s packed with lots of great info, and I encourage you to check it out. Or if you don’t have time for 117 slides check out this summary over on AllThingsD.

But looking a little closer, I was curious to find that Meeker released another report today entitled Immigration in America and the Growing Shortage of High Skilled Workers (see the full slide deck here). I thought perhaps this might be of greater interest to readers here on SD Japan, as many of the problems faced by the US are faced by other countries too, including Japan.

Readers may recall that at last week’s Infinity Ventures Summit, we heard Rakuten’s CEO Hiroshi Mikitani say:

The Japanese market is shrinking, and you have to go compete in the international market. But because Japan’s system is so closed, many talented engineers leave Japan. In the US there are over 200,000 or 300,000 engineers. We are lacking in volume, and could bring engineers from overseas. But then there are visa issues to handle.

Regarding this latter labor issue, Meeker provides a chart that clearly projects Japan’s shrinking labor force (in green). Of course while many other countries will experience this problem too, Japan with its famously aging population is the first country where the labor force is already on a serious downslide. And as such, it will be urgently pressed to find a solution long before other nations have to. But on the other hand, given how slowly regulations change, there’s no guarantee that Japan will react any quicker than other countries.

shrinking-labor-force

Meeker’s report outlines the problem of American immigration policies, as well as the growing discrepancy between visas issued to foreign students and H–1B employment visas issued. While foreign student visas are on the rise, employment visa are not – meaning that skilled foreign workers who could contribute to the American economy are often sent back to their home country, and aren’t given a chance to contribute to the US economy. Likewise, American tech companies cannot hire the skilled workers they need to stay competitive, largely because if the cap on H–1B visas. The report notes that only 85,000 are issued annually, but there is a demand for about 150,000 each year. As a result, US companies are often forced to move overseas and hire there. Mark Pincus of Zynga is quoted a saying:

The denial of US visas has forced us to routinely apply for visas in Canada or Ireland … We prefer that talented workers be able to work in our American offices as it would be best for our company, the people and the economy.

If I think about many of the entrepreneurs I’ve met here in Japan, I think many of them still see Silicon Valley as the place to be – and indeed a few standouts with global ambitions have made the jump to Silicon Valley (see recent admissions into 500 Startups App Socially and Whill for starters) or other markets. Of course the vast majority of entrepreneurs remain here in Japan, but even for the ones who do that, a global outlook is needed. As I referenced in the Mikitani quote in my opening remarks, the Japanese market is shrinking, and companies need to look for customers and users abroad. We have already highlighted some Japanese companies who are doing this well.

To emphasize this point, lets look back to Meeker’s report to a slide on the top ten global Internet companies (see below). While 8 of the top ten are American, 81 percent of the users for those services are outside the US. It shows that if you want to be a big player, you need to think beyond your own borders. So for example, Line has the right approach with its global ambitions, while companies like Mixi have suffered because they didn’t look beyond the domestic market.

This is something that even (traditionally) insular Chinese companies like Baidu and Tencent are coming to realize. But unlike China, Japan (and Japanese companies) has a cultural, societal, and environmental advantages when it comes to attracting workers, in my view [1]. It’s an attractive destination for entrepreneurs, and many companies – particularly mobile ones – are trying to set up shop here. We know this because many of them come speak to us.

If more entrepreneurs and skilled workers were able to come here, not only would it contribute directly to the economy, but it would result in a richer, more diverse tech ecosystem, where people of many different backgrounds could learn from one another. While there is not yet any kind of visa for entrepreneurs, there is one for highly skilled workers. Governments have established some special economic zones that offer tax breaks for startups (Tokyo, Osaka, and Fukuoka are progressing), but changes will need to be quick and drastic if Japan hopes to overcome this issue.

80-inside-81-outside


  1. I say this as someone who has lived and worked about five years in China and almost five years in Japan. Japan is still seen as a cool, clean, futuristic place, one that despite its failings is still far more culturally open. But regrettably regulations are still not changing as fast as they should. China on the other hand is a place that many people go to, but very few stay long term.  ↩