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Who Pays for the Minimum Wage in the Japanese Manufacturing Sector?

Author

Listed:
  • Kenta YAMANOUCHI
  • Hiroko OKUDAIRA
  • Miho TAKIZAWA
  • Kaoru HOSONO

Abstract

Employers respond to minimum wage hikes by reducing employment, accepting lower profits, or passing costs on to consumers or suppliers. Identifying which margin dominates is key to understanding who bears the cost of the minimum wage. We examine this incidence in Japan’s manufacturing sector, where exporters faced international competition and non-exporters until recently contended with persistently stagnant domestic prices. Using establishment-level data, we find robust evidence of a contraction in factor inputs but no clear cost pass-through to product prices. These results imply that higher labor costs were largely borne by firms and workers, particularly in settings with limited scope for pass-through.

Suggested Citation

  • Kenta YAMANOUCHI & Hiroko OKUDAIRA & Miho TAKIZAWA & Kaoru HOSONO, 2025. "Who Pays for the Minimum Wage in the Japanese Manufacturing Sector?," Discussion papers 25100, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:25100
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    References listed on IDEAS

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    1. Laura Giuliano, 2013. "Minimum Wage Effects on Employment, Substitution, and the Teenage Labor Supply: Evidence from Personnel Data," Journal of Labor Economics, University of Chicago Press, vol. 31(1), pages 155-194.
    2. Radhakrishnan Gopalan & Barton H. Hamilton & Ankit Kalda & David Sovich, 2021. "State Minimum Wages, Employment, and Wage Spillovers: Evidence from Administrative Payroll Data," Journal of Labor Economics, University of Chicago Press, vol. 39(3), pages 673-707.
    3. John J. Horton, 2025. "Price Floors and Employer Preferences: Evidence from a Minimum Wage Experiment," American Economic Review, American Economic Association, vol. 115(1), pages 117-146, January.
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