WAGE STRUCTURE IN THE JAPANESE LABOR MARKET

This research investigates the wage structure in the Japanese labor market, with a focus on differentiation in wages and determination mechanisms based on developments in the Japanese economy in the 1980s and 1990s. The thesis of this investigation has three facets. The first facet of the thesis is that wage inequality in Japan is increasing. The second facet of the thesis is that the locus of the greatest wage inequality in Japan over the coming decade will occur in relation to skill-levels, with the continually widening wage gap between higher-skilled workers and lower-skilled workers likely to continue to exacerbate wage inequality in Japan in the absence of effective governmental policies to address the situation. The third facet of the thesis is that the widening gap in wages between higher-skilled workers and lower-skilled workers will be exacerbated by the existing wage gap based on employee gender in the absence of effective policies designed to increase average wage levels for female workers in relation to male workers, although the gender-based wage gap in Japan narrowed somewhat in the 1990s.

Toshiaki Tachibanaki, Professor of Economics at Kyoto University, wrote in 1998 that Japan was moving away from the equality in income and financial assets that the country developed through p

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-point in its business cycle in 2000, an outcome that would place increasing pressures on wage equality in the 2001-2005 period. Traditional characteristics of employment practices in post-Second World War Japan have been (a) long-term employment and (b) a seniority-based wage system. Long-term employment reflects the practice of companies hiring people upon completion of schooling and retaining them as employees for the duration of their working lives. The seniority-base wage system reflects the practice of firms in increasing wage levels based primarily on employee longevity with the company. For large companies through the 1990s, seniority-based wage increases continued through the age of 50 for most employees, while such wage increases continued generally through the age of 40 for employees of smaller companies. Seniority wage increases refer to base salaries. Each company establishes its one longevity-based wage structure for base salaries. The basis for these salary structures is a combination of employee age and employee length of service with the company. The formulas vary by company, but the effects on average are that (a) in larger companies, seniority increases in base salaries end at approximately age 50 for
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Approximate Word count = 3283
Approximate Pages = 13 (250 words per page)

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