Xymax Real Estate Institute

TOPIC REPORTTo Solve the Labor Shortage Problem (Vol. 2)
How Much of a Shortage Will There Be for Non-Desk Workers?

December 1, 2023

Introduction
In May 2023, Xymax Real Estate Institute released a Topic Report titled To Solve the Labor Shortage
Problem (Vol. 1) –The Actual State and Issues of Non-desk Workers—.*1 In the report, we presented thedefinition, the actual state and issues of non-desk workers, who are at the center of the labor shortage
problem. Specifically, we indicated non-desk workers’ actual state as accounting for more than half of allworkers and having high proportions of older workers and part-time workers. We also confirmed the issuesof relatively low wages and the difficulty in attracting workers.
In this second report, we will provide a quantitative estimate of how much of a shortage there will be fornon-desk workers in the future. Specifically, using long-term time series data, we will examine how thenumber of non-desk workers by worker type has trended in the past and how it will change in the future,
as well as forecast the labor supply-demand gap by occupation.
The awareness and background factors for this examination are that while many people currently
recognize that labor shortage is a major social issue, it is difficult to imagine how much of a shortage there
will be for non-desk workers because the jobs that support society, especially non-desk work, tend to behidden from view (difficult to recognize) in everyday life. A worsening labor shortage may lead to a lack of
productivity improvement in business activities, a resulting slowdown in the growth of the Japanese
economy, and a loss of convenience, safety and comfort in our daily lives that we have come to take forgranted.
Through this report, we hope to share a sense of urgency about our society’s growing labor shortage
and provide a catalyst for readers to become concerned and deepen their understanding of the labor
shortage problem.
*1 To Solve the Labor Shortage Problem (Vol. 1)—The Actual State and Issues of Non-Desk Workers—, released on May 31, 2023
https://soken.xymax.co.jp/2023/05/31/2305-labor_shortage_1/

TOPIC REPORT: To Solve the Labor Shortage Problem (Vol. 2)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2024 Xymax Real Estate Institute Corporation. All rights reserved.

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Number of Workers—Past and Future(Number of Workers by Worker Type from 1950 to 2040)
In our first report, we categorized workers into desk workers, desk and non-desk workers and non-deskworkers and identified the current number of workers (based on the 2020 Population Census). In thissecond report, we categorize non-desk workers into four groups: “professional (mainly professional andengineering),” “life support (sales, service, security, cleaning),” “production (agriculture andmanufacturing process)” and “infrastructure (transport and machine operation, construction and mining,carrying, packaging, etc.)” and examine the past and projected numbers of workers to identify where there
are severe labor shortages for each type of non-desk work.
Figure 1 shows the number of workers for each worker type in the past (from 1950 to 2020) and in thefuture (from 2025 to 2040).
Figure 1: Number of Workers by Worker Type from 1950 to 2040

TOPIC REPORT: To Solve the Labor Shortage Problem (Vol. 2)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2024 Xymax Real Estate Institute Corporation. All rights reserved.

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Between the period of high economic growth and the bubble economy (from 1950 to 1995), the numberof desk workers more than quadrupled, from 3.99 million to 17.77 million, while the number of non-deskworkers increased only about 1.4 times, or about one-third of the growth rate of desk workers, from 32
million to 45.66 million. Possible factors include the structural shift to the tertiary sector during this period
and the migration of people to large urban areas with office districts.
Between the burst of the bubble economy and today (from 1995 to 2020), the number of workers(excluding those unclassifiable by occupation) has decreased by 7.93 million, partly due to a declining
population and an aging society with low birth rates. Of this decrease, 1.63 million were desk workers, and5.76 million were non-desk workers, indicating that a greater decrease was seen among non-desk workers
who support society at the front line.
Furthermore, assuming that the current pace of population decline and the occupation trends for eachage group continue, the number of desk workers is estimated to decline gradually to 15.18 million by 2040(-6% from 2020), while the number of non-desk workers is estimated to decrease at a more accelerated
pace by 5 million (-13% from 2020) to 34.89 million. When this decline is broken down into the four typesof non-desk workers described above, the largest decline is expected for life support non-workers (-2.09
million, or -16%, from 2020), followed by production non-workers (-1.29 million, or -14%, from 2020),
professional non-desk workers (-1.19 million, or -12%, from 2020) and infrastructure non-desk workers (0.44 million, or -6%, from 2020).

TOPIC REPORT: To Solve the Labor Shortage Problem (Vol. 2)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2024 Xymax Real Estate Institute Corporation. All rights reserved.

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Forecast of Worker Supply and Demand(Labor supply-demand gap from 2020 to 2040)

To quantify the severity of future labor shortages, we estimated the labor supply-demand gap (thenumber of workers needed by the economy minus the supply of workers estimated from the future
projected population) through 2040 under the assumption that the degree of economic growth, theindustrial structure and the trend of population decline do not change from today’s levels (Figure 2; see
the end of the report for details of the estimates). As a result, the estimated labor supply-demand gap asof 2040 is approximately 10 million people in total.
Figure 2: Labor Supply-Demand Gap by Worker Type from 2020 to 2040

TOPIC REPORT: To Solve the Labor Shortage Problem (Vol. 2)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2024 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜ Xymax Real Estate InstituteLooking at the breakdown, while the supply-demand gap for desk workers is estimated to be 1.82 million
in 2040, it is estimated to be 8.19 million for non-desk workers. Non-desk work is expected to account formost of the widening labor supply-demand gap for Japanese society as a whole. Specifically, the gap was
the largest (3.56 million) for life support non-desk workers, including care service, sales, security andcleaning workers, followed by professional non-desk workers, including health care workers and teachers(2.38 million), indicating that labor shortages are expected to worsen in jobs that support our daily lives at
the front line.
The supply-demand gap above does not include the impact of technological advances on labor supplyand demand, as it was difficult to quantify. However, desk work is more likely to be replaced by generativeAI, which is rapidly being developed and implemented in society. For desk workers, there may come a time
when the labor shortage is less severe than the above projections, or they may even become overstaffed.
These suggest that the future labor shortage problem will be centered around the supply constraints of
non-desk workers. If the speed of change in supply is not fast enough while the demand for jobs changes
with the times, society may become unstable, and various business models may change, significantly
affecting our daily lives.

Summary
In this report, we have attempted to estimate the degree of future labor shortages for the four types ofworkers. What we can infer from the results is that labor shortages for most non-desk workers will become
even more severe in the medium to long term, albeit to varying degrees, depending on the job.
Currently, the “2024 problem” is a hot topic in the distribution, construction and medical industries.
However, the shortage of non-desk workers also extends to assets such as office buildings that we use
every day, as well as retail properties and hotels. If nothing changes, their sustainability as commercial realestate will eventually decline.
What is important is to go beyond saying that the labor shortage is serious, think about how to addressit, and put it into practice. In future reports, we will focus on non-desk workers working in major assets andprovide readers with hints on how to think about the labor shortage through examples of efforts to address
the problem.

TOPIC REPORT: To Solve the Labor Shortage Problem (Vol. 2)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2024 Xymax Real Estate Institute Corporation. All rights reserved.

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TOPIC REPORT｜ Xymax Real Estate Institute≪Overview of the labor supply-demand gap estimation for Figure 2≫
This estimation model is based on the estimation method of the Japan Institute for Labour Policy andTraining (JILPT)’s Labor Supply and Demand Estimates—Future Estimates Based on the Labor Supply andDemand Model (FY2018) (JLIPT, 2019) and was conducted using the following procedures:① Estimation of labor demand: We estimated a model that indicates the relationship between nominal
GDP, working hours and wages using the actual values to date, assigned the projected values offuture nominal GDP, etc. (by the Japan Center for Economic Research and others) in the model andestimated the future number of workers by industry from a demand perspective.
② Estimation of labor supply: We built a model estimating the labor force participation rate by genderand age group based on actual values to date and estimated the labor force (labor supply by genderand age group) using the National Institute of Population and Social Security Research’s Population
Projections for Japan.
③ Estimation of the gap: We produced labor demand and labor supply by occupation based on theoccupational composition by industry of the 2020 Population Census, subtracted labor supply fromlabor demand for each occupation and estimated the shortage of labor supply. This estimation isbased on the assumption that each industry’s existing conditions (economic growth, technologicaladvances, regulations, industry structure) will continue and, therefore, does not reflect discontinuouschanges such as AI and geopolitical risks.

For further inquiries please contact below:Xymax Real Estate Institutehttps://soken.xymax.co.jp | E-MAIL: info-rei@xymax.co.jp

TOPIC REPORT: To Solve the Labor Shortage Problem (Vol. 2)
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness. This report may not be
reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2024 Xymax Real Estate Institute Corporation. All rights reserved.

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