Employment and unemployment — practice question

Study the source material closely before you answer Question 1. Source material: Labour shortages in Japan Japan has a relatively old average population age and mixed economic performance. It has a low birth rate, a low inflation rate, strong healthcare, high life expectancy and a low unemployment rate. Each year, fewer Japanese people join the labour force. It is forecast that Japan’s labour force will decrease by 10 million by 2040. Many young Japanese people move to Australia, Canada and the US in search of better pay. However, Japan is now experiencing net immigration, although foreign workers are still only a small share of Japan’s labour force. To reach an annual economic growth rate of 1.2%, it has been estimated that foreign workers would need to rise to 7 million by 2040. Some foreign workers are put off working in Japan because they must pass a Japanese language test. Only the most highly skilled are permitted to remain for more than 5 years and to take their families with them. Many Japanese industries are being affected by labour shortages and by the country’s falling population. For instance, the population decline has affected the volume of furniture traded. It has also had an impact on the country’s air transport industry. Air travel is the main transport method in Japan for foreign travel and for long-distance domestic travel. Japan’s air passenger figures show a pattern similar to world air passenger figures. Table 1.1 shows global GDP per head and global air passenger numbers between 2016 and 2022. Demand for goods and services, including air travel, depends on how much people save. Japanese people save a fairly large share of their income. This has affected the country’s inflation rate, current account balance of the balance of payments and economic growth rate. Japan’s macroeconomic performance is also affected by the mobility of its labour force. There are several reasons why the mobility of Japan’s labour force may alter in the future. These include an ageing workforce and possible changes in education and training, house prices and the quality and cost of transport. Answer all parts of Question 1. Use the source material in your answers.