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Changes in the Japanese Employment System in the Two Lost Decades

  • Hamaaki, Junya
  • Hori, Masahiro
  • Maeda, Saeko
  • Murata, Keiko

Despite changes in the economic and social environment following the burst of the bubble economy in the early 1990s, studies on the Japanese employment system so far have detected few major changes in seniority-based wage or lifetime employment patterns. Using recent microdata from the Basic Survey on Wage Structure, this paper takes another look at developments in these two key elements of the Japanese employment system. In contrast with previous studies, we do find evidence that the two practices are eroding and that, hence, the traditional employment system overall has begun to unravel. Specifically, with regard to seniority wages, we found, for example, that the age-wage profile has become flatter in recent years, especially for employees in the middle and final phase of their career. And as for lifetime employment, we found a clear downward trend in the share of lifetime employees among younger, university-educated workers from the early 2000s. Taken together, the findings suggest that a growing share of educated younger workers choose to leave indefinite-contract jobs due to the poor prospects for seniority-based wage progression, while older workers choose to stay in their present job despite stagnating or falling wages, since it is more difficult for them to find alternative employment.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/18995/1/pie_dp511.pdf
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Paper provided by Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University in its series PIE/CIS Discussion Paper with number 511.

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Length: 35 p.
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:hit:piecis:511
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  1. Rebick, M., 2000. "Japanese Labour Markets: Can we Expect Significant Change?," Economics Series Working Papers 9921, University of Oxford, Department of Economics.
  2. Kato, Takao, 2001. "The End of Lifetime Employment in Japan?: Evidence from National Surveys and Field Research," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 489-514, December.
  3. Moriguchi, Chiaki & Ono, Hiroshi, 2004. "Japanese Lifetime Employment: A Century's Perspective," EIJS Working Paper Series 205, The European Institute of Japanese Studies.
  4. Satoshi Shimizutani & Izumi Yokoyama, 2009. "Japan's Long-Term Employment Practice Survived? Developments Since the 1990s," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 62(3), pages 313-326, April.
  5. Hiroshi Ono & Marcus Rebick, 2003. "Constraints on the Level and Efficient Use of Labor," NBER Chapters, in: Structural Impediments to Growth in Japan, pages 225-258 National Bureau of Economic Research, Inc.
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