White Collar Exemption and Working Conditions: Impact of overtime regulations on hours worked and hourly wages (Japanese)

This paper examines the impact of overtime regulations on the hours worked and the hourly wages of Japanese white-collar employees. In Japan, managers with the title of section chief and higher are exempt from overtime regulations, like the white-collar exemption in the U.S. Recently in Japan, there has been a big discussion whether or not the range of white collar exemption currently allowed only to managers should be broadened to other employees. To estimate the impact of the possible change in the application of the white-collar exemption to other employees, this paper compares those who are exempt from overtime regulations with those who are not, using workers' longitudinal data from 2004 to 2008. We find that the impact of overtime regulations varies depending on the type of employees. Specifically, on average, the white collar exemption would increase hours worked for those with relatively lower income, those who work for wholesalers, retailers, restaurants and the lodging industry, and those who are not university graduates. On the other hand, the white collar exemption would decrease hours worked for employees with relatively higher annual income and university graduates. For those who work longer under the white-collar exemption, we find that their hourly wages are compensated with a higher base salary compared to that of non-exempted, which supports the concept of the fixed-job model. Regarding those who work shorter hours under the white-collar exemption, we find that it would be promotion rather than the white-collar exemption that would affect working hours. That is, they tend to work longer hours until they get promoted to manager, but once they achieve the promotion they work shorter hours, which is consistent with the tournament model.