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Economics and Immigration Research Paper

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Updated: Apr 30th, 2019

Introduction

Migration of labor has already become an essential element of the global economic reality. Globalization, communication, transport, and opening borders facilitate the transfer of workforce from one part of the world to another. The United States has always been the world’s most attractive immigration target; and most studies were focused on the effects of immigration on the economic, social, and labor processes in the U.S.1 The effects of immigration on other countries, including Japan, were persistently overlooked. Given the growing inflow of foreign workers to Japan, their effects on wages and career prospects need to be better understood.

The main question to consider is why in the Japanese macroeconomic contexts, where the majority of foreign workers are limited to unskilled jobs, the skills and qualifications they develop over time have little effects on their economic and career advancement.

Economic advancement of immigrants as the function of wages

Wages as the key indicator of immigrants’ economic integration

Japan is believed to be one of the “recently” immigrant countries.2 In the article on human capital, wages, and immigration to Japan Takeyuki Tsuda discusses the effects of immigrant skills on their wage prospects and career advancement. Tsuda believes that the level of wages is the central indicator of immigrants’ economic integration in Japan.3

This is mainly because immigrants bring their human and social skills to the host country, and the level of earnings they obtain in return reflects the degree to which these skills are accepted and used by the host society.4 It is no wonder that changes in wages and earnings are at the heart of the economic debate concerning the patterns of immigration to Japan.

The role of human capital in wage earnings

Human capital theories have long been at the center of the immigration debate. Human capital, or skills, is believed to be the main factor of professional and career growth among immigrants. Tsuda writes that the human capital construct encompasses individual skills, education and qualifications, and experiences.5

Previous studies of immigration to the United States showed that human capital determinants were the principal drivers of immigrants’ economic advancement in the host country.6 These findings reflect and build on traditional models of wage determination, in which human capital accumulation drives the subsequent growth in wages.7

However, Japan differs greatly from other countries of the world. Its immigration and macroeconomic contexts reduce the validity of traditional economic theories and models. It is possible to assume that skills, qualifications and experiences of immigrants to Japan play a minor role in their economic and professional advancement. Tsuda’s article and additional analysis will answer the following question: does human capital matter in immigrants’ economic and career advancement in Japan?

Macroeconomic contexts and immigration patterns in Japan

Migrant workers in Japan: Statistical and pattern analysis

In 2002, a total of 1,851,758 foreign residents were registered in Japan.8 61.5% of them were temporary residents.9 A defeated nation, after WWII Japan did not introduce any foreign labor policies, as its rural territories exemplified an ample source of productive labor force.10

It was not until the middle of the 1980s that Japan faced the growing inflow of foreign labor force.11 Since the inception of the first immigration policies in Japan, all incoming workers were classified as either professional or unskilled.12

At the end of 2002, Japan had an estimated 554,200 unskilled workers registered and actually working.13 Estimating the number of illegal foreigners working in Japan does not seem possible, but the results of statistical analyses suggest that the number of unskilled immigrants coming to Japan constantly increases.

One of the main reasons why more immigrants come to Japan is because native working age population rapidly declines. Following the global recession of 2008-09, Japan slowly expands the pool of foreign labor force in the country.

The official data provided by the Japan Institute for Labor Policy and Training suggest that the number of immigrants coming to Japan slowly but steadily increases. However, the current economic and social environment in Japan does not favor immigration.

Table 1: Changes in the number and percentage of native workers in Japan

1980 1990 2000 2005 2010 2025 2050
Working age population, 15-64 years old (thousands) 78,689 85,875 86,365 84,487 81,572 71,652 51,790
Working age population, 15-54 years old (proportion among the total population, %) 67.4 69.7 68.2 66.3 64.2 59.3 50.9

Source: The Japan Institute for Labor Policy and Training (58).

Immigration policies in Japan and human capital considerations

Japan remains increasingly exclusivist toward foreign entrants. Japanese immigration policies build on three important considerations: first, foreigners are admitted only as a measure of last resort; second, the entry of unskilled workers should be prohibited; and third, immigration must be temporary.14 Foreigners are treated differently from natives; and even amongst foreigners, the quality of relations and career patterns largely depends upon the immigrant’s family and ethnic origin.

Table 2: Changes in foreign labor inflows to Japan

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Changes in the stock of foreign labor force (thousands) 516 568 614 655 695 723 753 339 486 563
Changes in the stock of foreign labor force (% of total labor force) 0.8 0.8 0.9 1.0 1.0 1.1 1.1 0.5 0.7 0.9

Source: The Japan Institute for Labor Policy and Training (84).

“Foreign workers are confined generally to dirty, dangerous and low status occupations. Besides problems in occupation, the workplace and public policy, foreign workers in Japan encounter specific social problems, such as language barriers, lack of health care, and other social benefits.” (Tigno 70)

These macroeconomic and policy conditions reduce the validity of traditional human capital considerations; the latter have dominated the economic theory for many years. Understanding Japanese macroeconomic environments is extremely important, as most developed countries rely on macroeconomic factors to filter migration.15 More often than not, employers in the host country disregard the skills and knowledge previously accumulated by foreign workers.16 One of the main questions is what exactly drives immigration to Japan.

Dual labor market theory and immigration to Japan

Factors affecting international immigration to Japan

Previous models of wage and capital formation do not explain the nature and consequences of immigration to Japan. Dual labor market theory re-evaluates the patterns of immigration in macroeconomic environments. Based on the dual labor market theory, structural inflation, motivation, economic dualism and demography change the principles and patterns of international immigration. First, structural inflation greatly affects the quality of immigrant workforce.

Employers are particularly interested in low-skilled and unskilled workers, since it is cheaper than hiring native employees.17 Native workers typically avoid working in low paid jobs, and raising entry wages for native workers will necessarily require changing the entire structure of wages.18

Second, motivational factors of international immigration differ from those affecting native workers: native employees want more than just work; they want status and career growth, whereas immigrants perceive jobs as just a means to earn money.19

Third, most developed labor markets are characterized by inherent dualism, meaning that native workers are driven to the capital-intensive sector with higher wages, leaving the secondary sector with its low wages and job uncertainty to foreign newcomers.20

Fourth, advanced societies experience the growing demand for female labor, coupled with the rapid decline in birth rates; unable to satisfy the growing demand for labor, industrialized societies gradually realize the hidden benefits of attracting immigrant labor force.21

Skills and professional qualifications do not matter

In light of this information, Tsuda makes the final conclusion that, in the Japanese macroeconomic environments, human capital does not allow for greater wages and economic integration of immigrant workers. Japan is a recent country of immigration, and its immigrant labor markets are still in the state of infancy.22

Immigrants who come to Japan but cannot use local social resources have few opportunities to advance themselves in the Japanese labor markets.23 Based on the dual labor market theory, host country employers are not interested in hiring foreign workers to the jobs and positions requiring greater responsibility and higher levels of skills. Immigrants in Japan can successfully accumulate new knowledge, qualifications and skills.

These skills, as it appears, do not matter, unless these workers have access to social networks and resources that facilitate their search of better-paying jobs.24 As of today, Japanese employers are strongly in favor of hiring male workers of Japanese origin who were born and brought up abroad.25

The wage levels of immigrants indicate the degree of their economic integration with the host country, and it would be fair to say human capital plays only a minor role in the economic adjustment and career advancement of immigrant workers in Japan.

Conclusion

Japan is becoming a popular object of macroeconomic and population analysis. A recently immigrant country, Japan is attracting more foreign workers. The number of foreign newcomers slowly but steadily increases; nevertheless, the country remains increasingly exclusivist in its immigration decisions.

Those who come to Japan seek decent employment and good earnings. Simultaneously, their career and wage growth prospects are rather modest. More often than not, foreign immigrants in Japan have few opportunities to advance themselves professionally; human capital plays only a minor role in immigrants’ wage and career growth in Japan.

The dual labor market theory suggests that international immigration is driven by four essential factors: structural inflation, motivation, economic dualism and demography. In this sense, Japanese employers are highly motivated to hire foreign workers, who are cheaper than native employees and seek nothing but money.

Contrary to the earlier models of wage determination, human capital alone does not help immigrants to achieve a better economic status in Japan. Immigrants require access to social networks and connections that facilitate their search of better-paying jobs. The wage levels indicate the degree of immigrants’ assimilation with the local economic environment, and it would be fair to say human capital plays only a minor role in the economic adjustment and career advancement of immigrant workers in Japan.

Works Cited

Fiorio, Carlo and Christina Cattaneo. Immigration and Natives’ Skill Upgrade. Venice: Center for Economic Policy Research, 2010. Print.

Massey, Douglas S., Joaquin Arango, Graeme Hugo, Ali Kouaouci, Adela Pellegrino and Edward Taylor. “Theories of International Migration: A Review and Appraisal.” Population and Development Review, 19.3 (1993): 431-66. Print.

Sato, Makoto. “From Foreign Workers to Minority Residents: Diversification of International Migration in Japan.” Ritsumeikan Annual Review of International Studies, 3 (2004): 19-34. Print.

Solinger, Dorothy J. “Citizenship Issues in China’s Internal Migration: Comparisons with Germany and Japan.” Political Science Quarterly, 114.3 (1999): 455-478. Print.

Syed, Jawad. “Employment Prospects for Skilled Migrants: A Relational Perspective.” Human Resource Management Review, 18 (2008): 28-45. Print.

The Japan Institute for Labor Policy and Training. Databook of International Labor Statistics 2011. The Japan Institute for Labor Policy and Training, 2011. Web.

Tigno, Jorge V. “Migration, The Market and Society: issues in Philippine Labor Flows to Japan.” Philippine Social Science Review, 51.1 (1993): 57-78. Print.

Tsuda, Takeyuki. “When Human Capital Does Not Matter: Local Contexts of Reception and Immigrant Wages in Japan.” GeoJournal, 76 (2011): 641-59. Print.

Footnotes

1 Carlo Fiorio and Christina Cattaneo. Immigration and Natives’ Skill Upgrade. Venice: Center for Economic Policy Research, 2010, 2.

2 Takeyuki Tsuda. “When Human Capital Does Not Matter: Local Contexts of Reception and Immigrant Wages in Japan.” GeoJournal, 76 (2011), 641.

3 Ibid., 641.

4 Takeyuki Tsuda. “When Human Capital Does Not Matter: Local Contexts of Reception and Immigrant Wages in Japan.” GeoJournal, 76 (2011): 641.

5 Ibid., 641.

6 Ibid., 641.

7 Ibid., 642.

8 Makoto Sato. “From Foreign Workers to Minority Residents: Diversification of International Migration in Japan.” Ritsumeikan Annual Review of International Studies, 3 (2004): 22.

9 Ibid., 22.

10 Ibid., 22.

11 Ibid., 23.

12 Ibid., 24.

13 Ibid., 24.

14 Dorothy J. Solinger. “Citizenship Issues in China’s Internal Migration: Comparisons with Germany and Japan.” Political Science Quarterly, 114.3 (1999): 461.

15 Jawad Syed. “Employment Prospects for Skilled Migrants: A Relational Perspective.” Human Resource Management Review, 18 (2008): 31.

16 Ibid., 31.

17 Douglas S. Massey, Joaquin Arango, Graeme Hugo, Ali Kouaouci, Adela Pellegrino and Edward Taylor. “Theories of International Migration: A Review and Appraisal.” Population and Development Review, 19.3 (1993): 441.

18 Douglas S. Massey, Joaquin Arango, Graeme Hugo, Ali Kouaouci, Adela Pellegrino and Edward Taylor. “Theories of International Migration: A Review and Appraisal.” Population and Development Review, 19.3 (1993): 441.

19 Ibid., 442.

20 Ibid., 443.

21 Ibid., 443.

22 Takeyuki Tsuda. “When Human Capital Does Not Matter: Local Contexts of Reception and Immigrant Wages in Japan.” GeoJournal, 76 (2011): 641.

23 Ibid., 641.

24 Takeyuki Tsuda. “When Human Capital Does Not Matter: Local Contexts of Reception and Immigrant Wages in Japan.” GeoJournal, 76 (2011): 641.

25 Ibid., 641.

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