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Estimating the Effects of the Minimum Wage Using the Introduction of Indexation

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  • KAWAGUCHI Daiji
  • MORI Yuko

Abstract

We examine the impacts of the minimum wage on employment using the minimum wage hike induced by the introduction of indexation of the local minimum wage to the local cost of living. The revision of the Minimum Wage Act in 2007 of Japan essentially required the government to set the minimum wage indexed to the local cost of living with a five-year moratorium period. The government subsequently increased the minimum wage in areas where the cost of living was high relative to the local minimum wage. We find that minimum-wage hikes raised the wages of low-wage workers, but reduced the employment of young, less-educated men. A panel analysis based on matched Labour Force Survey data indicates that the minimum-wage hike decreased the job flows of prime-age men and women.

Suggested Citation

  • KAWAGUCHI Daiji & MORI Yuko, 2021. "Estimating the Effects of the Minimum Wage Using the Introduction of Indexation," Discussion papers 21007, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:21007
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    Cited by:

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    2. Yuji Mizushima & Haruko Noguchi, 2021. "Spillover effects of minimum wages on suicide mortality: Evidence from Japan," Working Papers 2105, Waseda University, Faculty of Political Science and Economics.

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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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