June 2023 | Japan Media Review

Japan’s strained distribution sector is heading for a crash

Artwork: Julio Shiiki - Photo by Chris Liverani on Unsplash

In 2018, the Japanese government enacted labor reforms that would regulate overtime (OT) hours in order to address worker burnout and, in extreme cases, death from overwork, for which the Japanese language has its own word: karoshi. The reforms are being implemented gradually. For regular employees of large companies, the rules went into effect in April 2019, and then in April 2020 for regular and non-regular employees at smaller companies.

However, some sectors do not have to implement the reforms until next year. These sectors involve work that typically requires longer hours: medical services and construction, for instance. Consequently, the ceilings for OT set by the reforms are different. Prior to the reforms, the ceiling for OT was 80 hours a month for all workers, with taxi drivers the exception at 100 hours a month. Eighty hours of OT a month was one of the criteria the labor ministry used to evaluate cases of karoshi. The new ceiling for regular employees of companies is 360 hours a year, though this limit can be increased to a maximum of 720 hours if both employee and employer come to an agreement. For construction workers, the ceiling will be set at 720 hours a year. The number of OT hours allowed is dependent on demand rather than on any intrinsic quality of the work involved. 

But construction isn't the only exception. Freight and delivery drivers will be allowed to work up to 960 hours OT a year starting in 2024, regardless of any special agreements reached between employees and employers. This eventuality has been anticipated ever since the reforms were discussed and have subsequently been labeled the 2024 Problem, since it is widely assumed that the reforms will exacerbate the current shortage of drivers. In March, Prime Minister Fumio Kishida organized a special conference to address the problem that will announce its findings in June. The media are reporting that once the reforms go into effect in April 2024, the number of deliveries, of everything from documents to bulk food, will decrease by 35% - a development that would hurt Japan's economy.

In April, a participant in the conference, Professor Wakana Shuto of Rikkyo University, who is an expert on labor issues, appeared on the TBS Radio talk show Session to point out that before the reforms were enacted, many people in certain sectors worked more hours of OT than the number regulated by law, and that workers will now have more recourse to refuse extra work without repercussions. However, in distribution, the situation is different since the pay for drivers is low to begin with, and many depend on OT just to make ends meet. So if employers enforce the new ceilings, many current drivers may quit in order to find higher paying jobs, thus making the shortage even worse. With fewer drivers, distribution companies will have to take less work, and thus shipping customers may not be able to have their goods delivered in a timely manner. 

On average, about half of a driver's pay is based on commissions, which are determined by number of deliveries and distances driven. Commissions supposedly reward hard work, but many drivers are handicapped by predetermined routes and fixed delivery schedules. They have less discretion to maximize commissions. Distribution companies use commissions in order to cover losses when business is slow, since they can pay their drivers less. For drivers it means lack of financial security. They depend on OT to bring their pay up to that of “regular workers,” Shuto said. Drivers make about 20% less money than non-driver regular employees. Consequently, in 2024, when OT becomes limited across the board, their pay will drop even further. 

Another issue for drivers is that operating a vehicle isn't the only work they do. In Japan, most drivers are expected to load and unload deliveries, regardless of volume, and in most cases they aren't paid extra for this work, which takes time that otherwise could be used to pick up and deliver more goods that would earn the driver more money. It is also physically difficult, which is a serious concern given that the average age of drivers has increased over time. In 2021, the average age for drivers of large trucks was 50, while that for all workers was 43. In the 1980s, the situation was reversed – truck drivers were younger than the average worker, but after labor laws were deregulated in the 1990s and more businesses entered the distribution sector and competition increased, exerting downwad pressure on wages. That meant fewer young people became drivers. Another factor was the new generation's attitude toward work, which was more about working conditions than about pay. Young people wanted more time off and long-distance truck drivers often are away from home for days at a time.

But it isn't just drivers of large trucks. Home package takuhaibin deliveries have increased exponentially with the advent of online shopping, but drivers' pay has not kept pace. During the Covid-19 pandemic, deliveries in general dropped due to stalled business activity, but consumer deliveries increased because people were stuck at home. Shuto said that many drivers are expecting a windfall in commissions now that the pandemic is officially over, but Shuto doesn't see that happening. To her, the main culprit in terms of pay for most freight movers is waiting time. Customers expect timely deliveries and thus pressure delivery companies to make their drivers show up early so that they can be there as soon as the order is ready. But often that means standing around and not getting paid. For home delivery, the problem has become customer expectations. Online retailers promote next-day delivery, often for no extra charge, so drivers don't get paid extra for the service. Shuto says that before the pandemic, 10% of all home deliveries were redeliveries because the recipient wasn't at home the first time. Drivers also don't get paid for redeliveries, which take up valuable time. During Covid, however, due to heavier volume, many courier services did away with signing for packages or set up delivery boxes in public places where recipients could pick up their packages. It was an improvement for drivers.

But the main reason for stagnant wages is the prices that shippers contract with delivery companies. When delivery companies say they are going to increase prices, shippers threaten to change delivery companies. The transport ministry has tried to standardize pricing for distance and weight, but they are only guidelines. Also, only 1% of drivers are unionized, so there is no collective action to increase their pay. As Shuto points out, nothing will change until shippers change their thinking and agree to higher prices. If delivery companies work together to increase prices, they could be accused of violating antitrust laws. Shuto believes the only solution is for the government to guarantee a base pay raise across the entire sector – a special minimum wage for all drivers that companies and then customers would have to deal with. But since this would affect consumers as well as business operations, it would require a sea change in attitude as well.

The government seems to be thinking in a different direction. According to the April 27 issue of the Tokyo Shimbun, an opposition party politician recently proposed an increase in the expressway speed limit for truck drivers as one solution to the 2024 Problem, the idea being that long distance truckers could make their deliveries more quickly. The suggestion was met with a barrage of criticism, since such a change would compromise safety and lead to more air pollution. It would also lead to higher expenses since higher speeds mean greater gasoline consumption. 

A government solution that received a positive response is a change in the toll discount system for delivery vehicles. As it stands, trucks can save up to 30% on expressway tolls between the hours of midnight and 5 a.m. However, this system has led to congestion, since trucks line up in front of toll booths waiting for the clock to strike midnight in order to qualify for the discount, so the transport ministry has proposed that trucks already on the expressway by 10 p.m.  can qualify, and if the distance driven is more than 400 km, then the discount can go as high as 50%. 

The transport ministry and individual companies have also been trying to encourage more women to become drivers. Women currently make up 4% of the driver workforce. A recent article in the business magazine President outlined the peculiar problems faced by female drivers that require improvements in the work environment, which neither the authorities nor the business community seem to understand. Some years ago, the transport ministry coined the term toragaru, supposedly a clever abbreviation of "truck girls," which became an object of derision, especially given that the promotional materials showed smiling young women driving trucks festooned with pink polka dots. It didn't have the desired effect, and women who were already drivers resented the campaign due to the stereotype it cultivated. What women wanted was better infrastructure for drivers, including more available toilets. A problem the world over is lack of public restrooms where drivers can relieve themselves, and a common sight in Japan is discarded PET bottles on the sides of roads filled with urine. Because of their physiology, men can use PET bottles, but women can't. Some, according to President, have resorted to using plastic bags.

But increasing the number of women drivers still doesn't solve the fundamental issue, which is low pay and harsh working conditions for all drivers. There's also the matter of expenses for drivers. Many are contract workers, which means they have to pay not only for their vehicles, but also for fuel and tolls and insurance. Consequently, a solution that has been proposed by drivers and groups that represent them is a centralized system in which shippers and delivery companies share information about orders that independent drivers can access in order to get more jobs that fit into their schedules. According to an interview with Masaru Hojo of the Japan Institute of Logistics Systems on the website, the government is now trying to actualize such a system. As it stands, deliveries are picked up from homes and businesses in a given area and taken to a regional hub, where they are sorted and then sent out to other regional hubs, from which they are then delivered to specific addresses. Hojo says that currently, on average, trucks operate at only 40% capacity at any given time, which is highly inefficient. The government's idea, he says, is to utilize the internet to communicate with drivers and warehouses in order to make pickups and deliveries more efficient, but this would require individual businesses to share their logistical information with other businesses. It would also require some industry standardization of things such as pallet sizes. Hojo says that the major convenience store companies are now discussing such an industry system where drivers could serve different stores freely. The same system would greatly improve food deliveries if different manufacturers shared their logistical information.

Then there are new systems being devised specifically for the benefit of drivers. An article that appeared last December in the Asahi Shimbun reported on an app called CBCloud, which appeared in 2013. The app is currently being used by 160,000 self-employed drivers. As with the ride-share system Uber, drivers track in real time delivery orders posted by companies that are shipping out packages or cargo. The company posts the pickup location and delivery address, as well as the price and size of the order on the app, and delivery people who are in the vicinity claim the order through the app. Payments are made through the app after the delivery is completed. The purpose is to make the delivery process more efficient, but it also benefits drivers in terms of pay. The app makes it possible to bypass the middlemen who normally take their cut of a delivery fee. Using the app, the drivers work directly with shippers. More signficantly, shippers who use the app may be compelled to pay higher rates: If the delivery fee offered is too low, it is possible that no driver will claim the order. Some 2,000 companies are registered with CBCloud, including Seven Eleven. 

All these solutions may help alleviate part of the 2024 Problem, but as Hojo said at the end of his interview, what is really necessary is a change in consumer and corporate thinking when it comes to distribution. Both those who send out orders and those who receive them have come to expect next-day delivery as the norm. People have to accept the notion that next-day delivery should cost more. In addition, all parties need to acknowledge that delivering freight and packages is hard, often frustrating work. As Shuto pointed out on Session, thanks to popular culture, drivers, especially drivers of large trucks, tend to have a romantic image: free on the open road to do what they want to do. The reality is completely the opposite. They are at the mercy of employers and customers who take them for granted.


Philip Brasor is a Tokyo-based writer who covers entertainment, the Japanese media, and money issues. He writes the Japan Media Watch column for the Number 1 Shimbun.