Bankruptcies due to employees "resigning" will reach a record 87 in 2024, a significant increase from the previous record.

 

  The shakeout of small and medium-sized enterprises that cannot "raise wages" is likely to accelerate by 2025.

  Of the 342 cases of labor shortage bankruptcies identified in 2024, 87 cases were found to be "employee retirement-type" bankruptcies, which were caused directly or indirectly by the resignation of employees or senior management. That's an increase of 20 cases, or nearly 30 percent, from the previous year (67 cases), significantly higher than 2019 (71 cases), when labor shortages peaked in many industries, and the highest number since 2013, when the data was compiled.

  By industry, the largest number of "employee retirement-type" bankruptcies in 2024 was in the service industry (31 cases), accounting for 35.6% of the total. It was the first time in five years since 2019 that the service industry accounted for the largest number of bankruptcies among all industries. Software development and other IT industries, as well as temp agencies, beauty salons, and nursing homes, all of which tend to have lower retention rates than other industries and experience labor shortages, are particularly common.

  The next largest number of cases was in the "construction industry" (18 cases), where the retirement of employees with qualifications essential for business operations, such as designers and construction supervisors, made it difficult for companies to operate their businesses. The "Manufacturing" and "Transportation/Telecommunications" sectors had more than 10 cases per year for the first time, with a string of cases in which businesses were unable to operate due to the retirement of factory workers and drivers.

  Recently, employees who are struggling with prolonged price hikes are increasingly calling for wage increases. In response to this trend, consideration of continuous wage increases has spread from large companies to small and midsize firms. On the other hand, there are many small and medium-sized firms that want to raise wages but are unable to do so due to a lack of profitability, and the response to wage hikes is becoming increasingly polarized.

  However, as the mobility of human resources increases against the backdrop of a severe shortage of workers, the "risk of not improving compensation" is increasing, especially among small and medium-sized companies, as executives and employees who are fed up with unsatisfactory wage increases and management that is reluctant to improve compensation are resigning. As the trend of attracting good talent with high salaries through wage increases spreads through the labor market, there is a growing possibility that the number of "wage hardship bankruptcies," in which employees quit due to unsatisfactory wage increases, will increase in 2025.

Improvement of digital literacy, an essential measure to combat labor shortages

Many companies are taking various measures to address the growing labor shortage problem. According to a survey by the Japan Institute for Labor Policy and Training (JILPT), approximately 60% of companies in the retail and service industries are experiencing a labor shortage of full-time employees and are struggling to cope with the situation.

◆Improvement of operational efficiency through the use of ICT

According to the survey results, the most frequently implemented measure to address labor shortages is "streamlining and automating operations through the use of ICT," with approximately 75% of companies implementing this measure. In other industries, the introduction of RPA and the implementation of AI-based business support systems are progressing. In the future, it will be necessary to utilize AI and other technologies for simple and routine tasks, and have people focus on high-value-added operations.

◆Human resource development and digital literacy

Improving the skills of existing employees is essential to the success of manpower management. With the increasing digitization of business operations, improving employees' ICT literacy, and more broadly, their "digital literacy" will directly lead to strengthening the competitiveness of the company.

Digital literacy refers to a wide range of skills and abilities to understand and effectively use digital technologies in general. It includes ICT skills as well as knowledge and skills in information retrieval and evaluation, and privacy and security management.

The company must first clarify the objective of improving digital literacy and share it with all employees to unify awareness within the company. Then, it is necessary to set up a system to share knowledge and expertise on digital skills and to provide education.

◆Creating an environment in which diverse human resources can play an active role

On the other hand, the survey results also indicate that raising wages and diversifying recruitment methods at the time of job offerings and actively promoting the elderly, women, and foreign human resources are also important measures to address labor shortages. The establishment of these systems will be necessary for companies to survive.