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Decomposing Wage Stagnation: Employment Reallocation, Wage Structure,and Demographics

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  • Ken Yamada

Abstract

Japan's average log real hourly wages rose until the mid-1990s, declined through the mid-2010s, and partially recovered thereafter. This paper decomposes these changes over 1980-2024 into four components: demographic change across worker types, changes in relative employment shares across job types, changes in relative log wages across job types, and unweighted mean wage growth. The framework combines a shift-share decomposition across worker types with an extension of the Olley-Pakes decomposition across job types within worker types, separating employment reallocation from changes in relative wage structure. The four components vary across periods. Before 1996, unweighted mean wage growth and changes in relative wage structure contribute positively, while demographic change and employment reallocation contribute negatively. During 1996-2014, all four components are negative. After 2014, the recovery mainly reflects unweighted mean wage growth. Employment reallocation and changes in relative wage structure contribute differently across dimensions of job type.

Suggested Citation

  • Ken Yamada, 2026. "Decomposing Wage Stagnation: Employment Reallocation, Wage Structure,and Demographics," Papers 2607.01561, arXiv.org, revised Sep 2026.
    • Handle: RePEc:arx:papers:2607.01561
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    References listed on IDEAS

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