In Japan, it’s common for an employee to work for the same company for their entire career. Indeed, lifetime employment has been a central feature of the nation’s economy since World War II, and with such limited job mobility, nominal wages haven’t grown for three decades.
But one Japanese company in the Information Technology (IT) sector has taken an unusual approach to reinvigorating the labor market. SHIFT, which provides software-testing services, is poaching and re-training workers from other industries, turning them into IT pros. As Prime Minister Fumio Kishida advocates for the reskilling of workers and for companies to increase wages, SHIFT’s system is an example of how companies could help put a dent in Japan’s entrenched model of lifetime employment, helping the country dig out of a decades-long deflationary environment.
Among its labor-market challenges, Japan faces a major shortage of IT engineers. Of the 75 million people in the country’s working population, only about one million are IT professionals. That’s a lower proportion than in other developed countries such as the US and Germany. But SHIFT estimates that 10% of Japan’s non-IT workers aspire to join the space.
Software testing is also one of the most labor-intensive processes in software development, as it entails the time-consuming work of manually looking for bugs within code and making sure an application works as intended. For firms that struggle to find experienced programmers to begin with, having those expensive programmers do testing doesn’t make sense. Some of SHIFT’s biggest customers are consulting firms that would rather have their own high-paid employees focus on their main business of consulting while outsourcing something like software testing to save money. For example, the average salary at Nomura Research Institute (NRI), an IT-consulting firm, is double the average at SHIFT:
Source: Company filings
Even though it’s lower than at other IT-related firms, compensation is a big part of the draw of making a career change to work at SHIFT. Candidates seeking to become software testers start by taking a recruitment exam, known as CAT, that filters applicants for certain skills and traits—comprehension, attention to detail, and judgment, for example—rather than computer-programming knowledge or IT experience. As of December, nearly 103,000 people have taken the CAT exam and about 16% have passed, according to SHIFT.
For the people SHIFT hires, it provides training and certification programs as well as performance-based compensation as incentives for continued learning and advancement. That sort of pay structure means that many of SHIFT’s personnel costs are variable, but the compensation scheme—and the fact that these workers were likely earning lower wages in their previous jobs—helps SHIFT attract and retain talent, which is important for the company to sustain growth. According to SHIFT’s filings, the average monthly unit price for its engineers is 818,000 yen (US$5,600). Engineer compensation accounts for about 60% of those sales, which implies an annual salary of about 6 million yen (US$41,000), higher than the average pay in Japan of 4.6 million yen (US$31,000).
By encouraging worker mobility and development of new skills, SHIFT is driving up Japan’s stagnant worker pay. ∎