Annual Report on

The Japanese Economy and Public Finance

2006

- Japanese Economy Heading for New Growth Era

with Conditions for Growth Restored -

Cabinet Office

Government of Japan


 [Toc]  [Prev]  [Next]  [Annual List

Section 2 Challenges towards the strengthening of human potentials in terms of acquiring vocational skills

    In Japan, changes have taken place in the environment surrounding worker's households, such as practice of employment and wages. It is argued that under this circumstance, there may have been changes in vocational education and training(28) and their effects. This section summarizes the state of vocational education and training including school education and education and training implemented both inside and outside firms for strengthening human potentials(29) in terms of acquiring vocational skills; at the same time, based on the awareness of vocational education and training on both sides, of workers and firms, it also summarizes challenges towards the strengthening of human potentials from the perspective of acquiring vocational skills in the future.

1. Strengthening of human potentials from the perspective of acquiring vocational skills

(Opportunities to strengthen human potentials from the perspective of acquiring vocational skills)
    From the perspective of acquiring vocational skills, it should be considered what efforts should be made to strengthen human potentials. In Survey on Job and Education conducted by the Cabinet Office, respondents were asked about where they had acquired professional knowledge and skills necessary for their jobs.
    The results of that survey in terms of last education(30) showed, the largest number of respondents replied that they had acquired knowledge and skills needed for their jobs "through actual work," but there were also many who replied that they had done so through school education before entering the workforce, such as "university education" and "graduate school education," and vocational education and training implemented mainly in the workplace after entering the workforce, such as "on-the-job training through superiors and senior staff" and "collective training within the firm," and voluntary "self-education" (Figure 3-2-1).
Figure 3-2-1 Acquisition Phase of Technical Knowledge and Specialist Skills
    From these results it is known that regarding the strengthening of human potentials from the perspective of acquiring vocational skills, school education before entering the workforce and vocational education and training after entering the workforce have both been playing an important role in acquiring skills and it is important to enhance quality of education while providing various kinds of such opportunities.
    Below is a study of the state of school education before entering the workforce and vocational education and training after entering the workforce, and the challenges.


2. School education

    School education has been playing the most basic and most important role in strengthening human potentials. In addition to the acquisition of basic knowledge and skills, school education is also an opportunity through which students can master various human potentials such as problem-solving skills, communication capability and sense of morality. Furthermore, higher educational institutions such as universities and graduate schools have been providing important opportunities for people to master highly professional skills. Below is a brief summary of the situation regarding school education in Japan.

(The percentage of students advancing to universities is on a rising trend.)
    The percentage of students advancing to universities in Japan is known to be on a rising trend in the long run. From Figure 3-2-2 it is known that in terms of the total of higher educational institutions including universities, the percentage of students advancing to higher education has reached 75% and it has become such an era that three out of every four receive some kind of higher education. The percentage of students advancing to graduate schools is also known to be on a rising trend in recent years, thereby showing that exposure to education in Japan has been rising.
Figure 3-2-2 Educational Advancement Rate in Japan

(The feature of cost for education that is borne by both the public and private sectors)
    The high percentage of cost burden borne by the private sector for higher education is characterized as the typical cost burden for education in Japan. Regarding the percentage of cost burden for school education borne by public and private sectors in Japan, the one by the private sector for primary and secondary education was approximately 1% higher than the average for OECD members. In contrast, the one for higher education was approximately 37% higher than the average for OECD members, and this is considerably high according to the international standard (Figure 3-2-3). Overall, in Japan cost burden for receiving higher education is by no means cheap.
Figure 3-2-3 Percentage of Cost Burden by the Private Sector for Primary, Secondary and Higher Education

(In terms of wages, people are benefited from university education to some extent)
    How an individual is benefited from advancement to a university can be confirmed through a comparison of wages that can be earned in a lifetime between a university graduate and a high school graduate. According to White Paper on the National Lifestyle, if lifetime income is compared between a university graduate and a high school graduate, we can see that the former would earn more lifetime wages (Figure 3-2-4). Of course, there are different motivations to advance to a university and the value of university education is not determined merely by the difference in wages. However, from the viewpoint of an individual, one of the advantages to advance to a university is considered as the higher possibility to earn corresponding wages with higher cost paid.
Figure 3-2-4 Life-time Wages by a College Graduate and a High School Graduate
    On the other hand, however, the return on investment in university education is said to be on a declining trend, due partly to the fact that cost of advancement to universities and university education is rising each year and advancement to a university has become a common thing. According to White Paper on the National Lifestyle, if expenses spent in university education (including also income during the four years that one cannot earn due to advancement to a university) are recovered as the difference in wages from a high school graduate, the return on investment in university education was on a declining trend in the recent years, and the return on investment in university education for those born in 1960, 1965, 1970 and 1975, standing at 6.0%, 6.1%, 6.0% and 7.5% respectively, showed a declining trend (Figure 3-2-5). In addition, not only does benefit of education vary largely with individuals, but return on investment in university education can also change depending on the firm in which one works, and therefore, the return on investment in university education varies with individuals and it is necessary to have a range for it.
Figure 3-2-5 Return on Investment in University Education
    Furthermore, it is necessary to note that even those with a university or graduate college degree may become a NEET or freeter.


3. Vocational education and training provided by firms in Japan
    Human resource development in Japanese firms has had the feature that firms recruit a great number of new graduates at one time and take the responsibility to train them, and vocational education and training in firms is said to have played an important role in acquiring vocational skills. However, there is a possibility that the role of firms as a provider of vocational education and training may have been changing in recent years.

(Education and vocational training implementation rate in Japan showing a downtrend)
    For instance, according to the Basic Survey on Capability Development conducted by the Ministry of Health, Labour and Welfare surveying vocational education and training in Japan asked questions about the entity responsible for developing employees' capability. According to the survey, respondents replying that firms were the main entity responsible for capability developing accounted for a high percentage, but compared to the past, those who replied so were on a declining trend: regarding the direction in the future, the results showed that firms' responsibility would decline while each employee's would take more responsibility (Figure 3-2-6) for it.
Figure 3-2-6 Main Entity Considered by Firms to Be Responsible for Developing Employees' Capability
    In addition, the state of vocational education and training implementation and firms' spending on vocational education and training expenses can be seen from the above-mentioned Basic Survey on Capability Development and its predecessor, Survey on State of Education and Training by the Private Sector conducted by the former Ministry of Labor. The two surveys investigated the state of the two types of vocational education and training by firms, i.e., Off-JT (Off-the-Job Training) in which a trainee temporarily leaves his/her routine work to receive vocational education and training, and well-planned OJT (On-the-Job Training) in which vocational education and training is implemented stepwise and continually in combination with daily operations. Both dropped significantly in the 1990s after the burst of the economic bubble (Figure 3-2-7) and are considered to be on a declining trend in the long term(31).
Figure 3-2-7 Changes in Education and Training Implementation Rate
    Moreover, the same state can be seen from firms' spending on education and training expenses. Even in terms of firms' spending on education and training expenses shown in the General Survey of Working Conditions conducted by the Ministry of Health, Labour and Welfare and its predecessor General Survey on Wages and Working Hours System conducted by the former Ministry of Labor, the same trend can be seen in the same way as the vocational education and the training implementation rate, and the ratio of firms' spending on education and training to labor costs had significantly dropped since the burst of the economic bubble in the 1990s (Figure 3-2-8) and is considered to be on a declining trend.
Figure 3-2-8 Changes in the Ratio of Education and Training Expenses to Total Labor Costs
    The reasons for a declining role of firms as a provider of vocational education and training are considered to the fact that education and training budget had been restrained under the pressure of firms' cost reduction throughout the 1990s since the end of the economic bubble, and that great changes had been taking place in firms' human resource management such as the change in life-time employment and seniority-based wage system, active mid-career recruitment that emphasized adaptable work potential for which no education cost was needed, and an increase in non-regular employment.
    Since the above-mentioned Figure 3-2-1 suggests that vocational education and training (mainly OJT) provided by firms has been playing an important role in acquiring vocational skills. Change in firms' role of vocational education and training will be considered as an important issue from the perspective of strengthening human potential. Discussions should also be made about how to provide various opportunities of vocational education and training after workers' entering the workforce.


4. Significance and problems of vocational education and training seen respectively from individuals and firms

(Significance of vocational education and training for individuals and firms)
    Finally, the significance and problems of vocational education and training viewed from the standpoint of individuals and firms respectively are examined. Regarding the awareness of the objective of vocational education and training, there are reports of questionnaire surveys available on the respective viewpoint of individuals and firms.
    Regarding the significance of vocational education and training viewed from individuals, in the questionnaire survey conducted by the Cabinet Office, respondents replied in a relatively varied way in terms of the objective of those who received vocational education and training voluntarily; such as "Necessary for the current job," "For the purpose of being well-educated" and "For the purpose of improving my career though without any specific objective." However it is also seen that there is the consumptive facet of feeling satisfied by attending lectures of vocational education and training per se, such as replies vaguely implying investment for the future in addition to investment for the present and "the perspective of hobby." On the other hand, in terms of the objective of those who received vocational education and training by others' order, there was an overwhelmingly large number of respondents replying "it is my company order" and next to that was the reply of "it is necessary for the current job" (Figure 3-2-9).
Figure 3-2-9 Individuals' Objective to Receive Vocational Education and Training
    Regarding the significance of human resource development viewed from firms, Questionnaire Survey on Firms' Human Resource Development conducted by the Cabinet Office is available. The respondents replying "Enhance product and service quality and productivity" and "Contribute to nurturing teamwork and loyalty to the company" accounted for a high percentage (Figure 3-2-10). It can be seen that in addition to the firms' role in enhancing productivity through individuals' capability building and the strengthening of human potential, vocational education and training also plays a role in forming the sense of belonging to the company such as nurturing teamwork.
Figure 3-2-10 Reasons for Firms to Enforce Human Resource Development

(Problems of vocational education and training considered by individuals and firms respectively)
    Basic Survey on Capability Development (conducted by the Ministry of Health, Labour and Welfare) investigated the problems of vocational education and training viewed from individuals and firms respectively (Figure 3-2-11). As for a problem of self-education by an individual, time and financial constraints accounted for a high percentage, such as "I'm too busy to have time for self-education" and "It costs too much." At the same time, respondents replying "The effectiveness of participating in lectures or acquiring a qualification is uncertain," "I cannot find proper vocational education and training facilities," "It's difficult to get information on school" and "The result of self-education is not positively evaluated in the company" accounted for nearly 20% respectively as well, and it is therefore seen that there also exist problems such as inadequacy of vocational education and training facilities which can meet diversified needs, the problem of information provision and capability rating in the company.
Figure 3-2-11 Problems for Individuals to Receive Vocational Education and Training
    From the standpoint of firms, replies such as "We don't have enough instructors," "We don't have time for human resource development," "Employees quit the job even if trained to be qualified" and "We don't have extra funds for training" accounted for a high percentage (Figure 3-2-12). It can be seen that for firms, there are problems of how to set up the system of vocational education and training and how to prevent qualified employees from quitting their jobs, and problems in terms of time and funds.
Figure 3-2-12 Problems for Firms to Implement Human Resource Development Program


5. Future prospects of the strengthening of human potential

    Vocational education and training has an aspect of contributing to the strengthening of Japan's overall competitiveness as a result of firms achieving enhanced productivity through capability building for individuals, as it plays a role of supporting employment through the acquisition of special knowledge and skills concerning occupations.
    On the other hand, however, individuals play an increasing role of vocational skill building, and under the circumstances where the role of firms as a provider of vocational education and training may be changing, thus the way of securing opportunities of vocational education and training is considered to become an important issue to be addressed for the future.

(The strengthening of vocational education and training in school education also contributes to the resolution of freeters and NEETs issues)
    The introduction of vocational education and training in school education can be treated as an issue to be addressed for school education. For instance, freeters and NEETs who have been highlighted in recent years are thought to have been caused by such factors as their low job consciousness, e.g., the desirable occupation or the job of their choice proved to be different or they do not know what should be done, and inadequacy of vocational skills such as necessary knowledge and skills despite one's intention to become a regular employee. It is considered to be important to solve these problems during school education.
    In order to provide assistance to the formation of job consciousness, from the stage of school education efforts should be made to increase opportunities to have exposure to information on occupations so as to raise awareness concerning working, and at the same time, it is necessary to provide opportunities to think about the job of choice by creating more opportunities to recognize what an occupation or a job actually is like.
    Under the current situation where the rate of advancement to higher educational institutions represented by universities has been rising and a great number of people can receive higher education, it is considered that the role played by higher education should change as well. For instance, in addition to the traditional role of universities as a place to foster academic figures, they might also be required to provide diversified educational services so that students can acquire practical specialist knowledge and skills concerning jobs in accordance with each particular individual's diversified needs. From the perspective of vocational skill building, it is also considered to be significant to create more opportunities to acquire highly practical specialist knowledge and skills before entering the workforce.

(Provide various opportunities of education and training even after entry into the workforce)
    It is also an important issue to improve the function of vocational education and training after entry into the workforce. Under the current situation where there is a concern that the role of firms as a provider of vocational education and training may be changing, it is also required to provide opportunities of vocational education and training which can replace vocational education and training provided by firms. In parallel with the improvement of vocational education and training in school education before entry into the workforce, there is also an important issue of how to secure various opportunities to receive vocational education and training after entry into the workforce.
    To assist those who have no other choice but to become freeters or NEETs because they have no opportunities to acquire capability such as knowledge and skills despite their intention to become regular employees, it is considered as an effective measure to develop and introduce short-term educational programs while making the best use of the education and training benefits system and opportunities of vocational education and training provided by public institutions, so that they can acquire special knowledge needed for employment in a short period.
    As there is also a viewpoint that those who are actually working hope to master special knowledge and skills at a higher level and make good use of them in their work, it is important to provide various opportunities to receive vocational education and training outside firms, as well as to encourage the creation of opportunities to provide advanced educational services such as professional graduate schools which is advocated by Basic Policies on Economic and Fiscal Management and Structural Reform 2005.

(It is also necessary to create an environment easy for individuals to receive vocational education and training)
    In addition, it might also be necessary to make efforts to create an environment for individuals to receive vocational education and training more easily. As time and financial constraints are pointed out in the most cases as problems for individuals to receive vocational education and training, it is considered as an effective means to encourage firms to take support measures of some sort such as the holiday system for the purpose of employees' receiving vocational education and training, and the system to support their acquiring qualification.
    Moreover, as there are also comments that the effectiveness of vocational education and training is uncertain and participation in course lectures of them are not positively evaluated, setting a clear career path can be an issue to be addressed for the future. It is important as well that firms should actively present what is included in the career path and what capable people they searched for, and also create an environment in which employees can receive vocational education and training with a clear sense of purpose.


 [Toc]  [Prev]  [Next]  [Annual List