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The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994 |2003

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  • Ryo Kambayashi
  • Daiji Kawaguchi
  • Ken Yamada

Abstract

The median wage in Japan has fallen nominally since 1999 due to a severe recession, while the statutory minimum wage has steadily increased over the same period. We used large micro-data sets from two government surveys to investigate how the minimum wage has affected wage distribution under the unusual circumstances of deflation. The compression of the lower tail of female wage distribution was almost completely explained by the increased real value of the minimum wage. The steady increases in the effective minimum wage reduced employment among low-skilled, young and middle-aged female workers, but the mechanical effect associated with disemployment on wage compression was minimal. These results held even after controlling for composition effects. The minimum wage contributed to the reduction in the pay gap between full-time and part-time workers.

Suggested Citation

  • Ryo Kambayashi & Daiji Kawaguchi & Ken Yamada, 2009. "The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994 |2003," Global COE Hi-Stat Discussion Paper Series gd09-074, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd09-074
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    Cited by:

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    3. Mr. Giovanni Ganelli & Ms. Chie Aoyagi, 2013. "The Path to Higher Growth: Does Revamping Japan’s Dual Labor Market Matter?," IMF Working Papers 2013/202, International Monetary Fund.
    4. 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.
    5. Daiji Kawaguchi & Yuko Mori, 2009. "Is Minimum Wage An Effective Anti‐Poverty Policy In Japan?," Pacific Economic Review, Wiley Blackwell, vol. 14(4), pages 532-554, October.
    6. Yokoyama, Izumi & Kodama, Naomi & Higuchi, Yoshio, 2019. "Inequality through wage response to the business cycle–Evidence from the FFL decomposition method," Journal of the Japanese and International Economies, Elsevier, vol. 51(C), pages 87-98.
    7. Jeremy Lise & Nao Sudo & Michio Suzuki & Ken Yamada & Tomoaki Yamada, 2014. "Wage, Income and Consumption Inequality in Japan, 1981-2008: from Boom to Lost Decades," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 582-612, October.
    8. Yoshio Higuchi, 2013. "The Dynamics of Poverty and the Promotion of Transition from Non-Regular to Regular Employment in Japan: Economic Effects of Minimum Wage Revision and Job Training Support," The Japanese Economic Review, Japanese Economic Association, vol. 64(2), pages 147-200, June.
    9. Mika Akesaka & Koyo Miyoshi, 2018. "Wage Inequality during the Long-term Stagnation in Japan: Changes within and between Establishments," ISER Discussion Paper 1045, Institute of Social and Economic Research, Osaka University.
    10. Majchrowska, Aleksandra & Strawiński, Paweł, 2018. "Impact of minimum wage increase on gender wage gap: Case of Poland," Economic Modelling, Elsevier, vol. 70(C), pages 174-185.
    11. KAWAGUCHI Daiji & MORI Yuko, 2014. "Winning the Race against Technology," Discussion papers 14017, Research Institute of Economy, Trade and Industry (RIETI).
    12. Yamada, Ken, 2016. "Tracing the impact of large minimum wage changes on household welfare in Indonesia," European Economic Review, Elsevier, vol. 87(C), pages 287-303.
    13. Aoyagi, Chie & Ganelli, Giovanni, 2015. "Does revamping Japan's dual labor market matter?," Economic Systems, Elsevier, vol. 39(2), pages 339-357.
    14. Ken Yamada & Daiji Kawaguchi, 2012. "Changing Unchanged Inequality: Higher Education, Youth Population, and the Japan's Seniority Wages," Global COE Hi-Stat Discussion Paper Series gd12-243, Institute of Economic Research, Hitotsubashi University.
    15. MORIKAWA Masayuki, 2019. "Minimum Wages and Productivity: Evidence from Japan," Policy Discussion Papers 19015, Research Institute of Economy, Trade and Industry (RIETI).
    16. Kyota Eguchi, 2010. "Minimum Wages and Trainers' Dilemma," LABOUR, CEIS, vol. 24(2), pages 128-138, June.
    17. Nidhiya Menon & Yana van der Meulen Rodgers, 2017. "The Impact of the Minimum Wage on Male and Female Employment and Earnings in India," Asian Development Review, MIT Press, vol. 34(1), pages 28-64, March.
    18. Kawaguchi, Daiji & Mori, Yuko, 2021. "Estimating the effects of the minimum wage using the introduction of indexation," Journal of Economic Behavior & Organization, Elsevier, vol. 184(C), pages 388-408.
    19. Okudaira, Hiroko & Takizawa, Miho & Yamanouchi, Kenta, 2019. "Minimum wage effects across heterogeneous markets," Labour Economics, Elsevier, vol. 59(C), pages 110-122.

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    More about this item

    Keywords

    Minimum Wage; Wage Distribution; Wage Inequality; Employment; Deflation;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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