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Lifetime Labor Income and the Erosion of Seniority-Based Wages in Japan: Evidence Based on Administrative Data Records

Author

Listed:
  • Hori, Masahiro
  • Iwamoto, Koichiro

Abstract

This paper examines the impact of the erosion in seniority-based wages on lifetime labor income in Japan. Despite the importance of this issue, studies to date have not been able to address it directly because reliable datasets long enough to cover individuals’ entire careers were not available. Taking advantage of administrative data records on individuals’ careers, which became available with the introduction of Pension Coverage Regular Notices, Takayama et al. (2012) constructed a panel dataset of career records covering a period of more than 30 years. We use the dataset to derive wage profiles throughout individuals’ careers. Moreover, using the estimated wage profiles for individuals with different sets of characteristics, we calculate the lifetime labor income (over a 35-year period) for those individuals to examine the impact of the erosion of Japan’s seniority wages on lifetime income. We confirm that the wage-age profile of lifetime employees over their working life has been gradually flattening in recent years. The flattening is particularly prominent among middle-aged and elderly white-collar workers with a college background, and it appears to have decreased their lifetime labor income by about 10 to 30 percent.

Suggested Citation

  • Hori, Masahiro & Iwamoto, Koichiro, 2012. "Lifetime Labor Income and the Erosion of Seniority-Based Wages in Japan: Evidence Based on Administrative Data Records," CIS Discussion paper series 554, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:cisdps:554
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/22940/1/cis_dp554.pdf
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    References listed on IDEAS

    as
    1. Rebick, Marcus, 2005. "The Japanese Employment System: Adapting to a New Economic Environment," OUP Catalogue, Oxford University Press, number 9780199247240.
    2. Junya Hamaaki & Masahiro Hori & Saeko Maeda & Keiko Murata, 2012. "Changes in the Japanese Employment System in the Two Lost Decades," ILR Review, Cornell University, ILR School, vol. 65(4), pages 810-846, October.
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    Cited by:

    1. Akiomi Kitagawa, 2014. "Wage Profiles and Income Inequality among Identical Workers: A Simple Formalization," DSSR Discussion Papers 23, Graduate School of Economics and Management, Tohoku University.
    2. Takayama, Noriyuki, 2013. "Closing the Gap between the Retirement Age and the Normal Pensionable Age in Japan," CIS Discussion paper series 583, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    3. Takayama, Noriyuki, 2013. "Intergenerational Equity and the Gender Gap in Pension Issues," CIS Discussion paper series 605, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Keywords

    Seniority-based wages; Lifetime labor income; Japan;

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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