Regular/Non-regular Wage Gap Between and Within Japanese Firms

• In Event: 161 - Section on Organizations, Occupation and Work Roundtable Session (one-hour).
  In Refereed Roundtable: Table 14. Job Insecurity and Temporary Employment I

Abstract

The volume of non-regular employment is expanding in Japan, and the wage gap between regular/non-regular employees is considered to be a serious problem. In order to determine which type of measure is effective to reduce this gap, it is necessary to examine whether it is an “inter-firm wage gap” which reflects the wage levels of firms or an “intra-firm wage gap” which exists within each firm. Accordingly, coefficients of the wage functions estimated by the pooled OLS model were compared with those estimated by the fixed-effect model, using the nationwide employer-employee matching data collected by the Ministry of Health, Labour and Welfare of Japan (N = 23,407 employees nested in 7,118 firms). As a result, it is found that the regular/non-regular wage gap estimated by the pooled OLS model does not differ from that estimated by the fixed-effect model, as is the case with the gender wage gap. This means that every firm uses non-regular employees regardless of their productivity or wage level, and that the regular/non-regular wage gap in the labor market is generated purely within each firm. In other words, it is an “intra-firm wage gap.” Therefore, the only way to reduce the wage gap is equalization within each firm. On the contrary, it is also found that wage gaps by education and occupation in the labor market reflect the wage level of the firm, in other words, they have aspects of an “inter-firm wage gap.”

Author

• Koji Takahashi, The Japan Institute for Labour Policy and Training