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Changes in the Japanese Employment System in the Two Lost Decades

Author

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

Abstract

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.

Suggested Citation

  • Hamaaki, Junya & Hori, Masahiro & Maeda, Saeko & Murata, Keiko, 2011. "Changes in the Japanese Employment System in the Two Lost Decades," PIE/CIS Discussion Paper 511, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:piecis:511
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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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    References listed on IDEAS

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    1. Satoshi Shimizutani & Izumi Yokoyama, 2006. "Has Japan's Long-term employment Practice Survived? New Evidence Emerging Since the 1990s," Hi-Stat Discussion Paper Series d06-182, Institute of Economic Research, Hitotsubashi University.
    2. Rebick, M., 2000. "Japanese Labour Markets: Can we Expect Significant Change?," Economics Series Working Papers 9921, University of Oxford, Department of Economics.
    3. 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.
    4. Moriguchi, Chiaki & Ono, Hiroshi, 2004. "Japanese Lifetime Employment: A Century's Perspective," EIJS Working Paper Series 205, Stockholm School of Economics, The European Institute of Japanese Studies.
    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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    Citations

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    Cited by:

    1. Christian Dreger, 2017. "Long-term growth perspectives in Japan and the Euro area," Asia Europe Journal, Springer, vol. 15(4), pages 363-375, December.
    2. 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.
    3. Ayako Kondo, 2016. "Effects of increased elderly employment on other workers’ employment and elderly’s earnings in Japan," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-23, December.
    4. Ken Yamada & Daiji Kawaguchi, 2015. "The changing and unchanged nature of inequality and seniority in Japan," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(1), pages 129-153, March.
    5. repec:eee:jjieco:v:44:y:2017:i:c:p:78-89 is not listed on IDEAS
    6. Kyoji Fukao & Victoria Kravtsova & Kentaro Nakajima, 2014. "How important is geographical agglomeration to factory efficiency in Japan’s manufacturing sector?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(3), pages 659-696, May.
    7. Esteban-Pretel, Julen & Tanaka, Ryuichi & Meng, Xiangcai, 2017. "Changes in Japan’s labor market during the Lost Decade and the role of demographics," Journal of the Japanese and International Economies, Elsevier, vol. 43(C), pages 19-37.
    8. Keishi Fujiyama & Makoto Kuroki, 2017. "Employee Downsizing and Accounting Choices: Evidence from Japan," Discussion Paper Series DP2017-06, Research Institute for Economics & Business Administration, Kobe University, revised Sep 2017.
    9. Kodama, Naomi & Inui, Tomohiko & Kwon, Hyeogug, 2014. "A Decomposition of the Decline in Japanese Nominal Wages in the 1990s and 2000s," CIS Discussion paper series 631, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    10. Daiji Kawaguchi & Yuko Mori, 2014. "Winning the race against technology," Bank of Japan Working Paper Series 14-E-5, Bank of Japan.
    11. YOKOYAMA Izumi & KODAMA Naomi & HIGUCHI Yoshio, 2016. "What Happened to Wage Inequality in Japan during the Last 25 Years? Evidence from the FFL decomposition method," Discussion papers 16081, Research Institute of Economy, Trade and Industry (RIETI).
    12. Hirokatsu Asano & Takahiro Ito & Daiji Kawaguchi, 2013. "Why Has the Fraction of Nonstandard Workers Increased? A Case Study of Japan," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(4), pages 360-389, September.
    13. Kawaguchi, Daiji & Mori, Yuko, 2016. "Why has wage inequality evolved so differently between Japan and the US? The role of the supply of college-educated workers," Economics of Education Review, Elsevier, vol. 52(C), pages 29-50.
    14. Kawaguchi, Daiji & Ueno, Yuko, 2013. "Declining long-term employment in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 28(C), pages 19-36.
    15. Hiroshi Teruyama & Hiroyuki Toda, 2017. "Wage Profiles in the Japanese Dual Labor Market," KIER Working Papers 961, Kyoto University, Institute of Economic Research.
    16. Keishi Fujiyama, 2016. "Fixed Asset Impairment Accounting and Employee Negotiations: Evidence from Japan," Discussion Paper Series DP2016-10, Research Institute for Economics & Business Administration, Kobe University, revised Jan 2017.
    17. 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.

    More about this item

    Keywords

    Seniority-based wages; Lifetime employment; Japan;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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