A Decomposition of the Decline in Japanese Nominal Wages in the 1990s and 2000s

Naomi Kodama, Tomohiko Inui and Hyeogug Kwon

No 631, CIS Discussion paper series from Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University

Abstract: In the 1990s and the 2000s, the average nominal wage in Japan declined continuously. This is a sharp contrast to wage trends in other developed countries in the same period. This study seeks to provide new quantitative evidence on the possible factors contributing to the nominal wage decline in Japan’s so-called “two lost decades” employing the Blinder-Oaxaca decomposition method using data from the Basic Survey on Wage Structure for 1993-2008. We find that half of the decline of the average wage in the total economy is due to the growing employment share of low-wage industries. Further, we decompose changes in average wages at the industry level for three subperiods representing different phases of the business cycle in Japan. Controlling for worker characteristics, we find the wages of workers in the manufacturing, wholesale, and medical, health care, and welfare industries declined between 1998 and 2003. Further, our results show that 1997 was the turning point in terms of changes in the wage structure. In addition, we find that wages for workers with the same characteristics continued to decline in the 2000s, albeit at a slower pace, and the main factor responsible for the wage decline was changes in the composition of the workforce in the wholesale, retail, and medical, health care, and welfare industries.

Keywords: nominal wage decline; deflation; changes in industrial structure; trade and labor market interactions (search for similar items in EconPapers)
JEL-codes: E24 E32 F16 J31 L80 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-08
New Economics Papers: this item is included in nep-ger, nep-lab, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:cisdps:631

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