Labor Force Graying and Foreign Workers in Japan

We first argue theoretically that labor force graying caused by younger workers shrinking and older workers growing leads to more employment of foreign workers. We then use Japan’s prefectural data to estimate that on average a 10 percent fall between 2010 and 2015 in the relative number of younger workers aged under 40 leads to an increase of more 11.7 foreign workers per one thousand native workers between 2010 and 2019. In addition, there is also evidence that prefectures that experienced a relatively increased local labor shortage tend to employ more foreign labor between 2010 and 2019 in Japan