What are the incentives behind working-hour adjustments by second earners?

Naomi Kodama, Shohei Momoda, Masahiro Mikayama and Tomohiro Iguchi
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Naomi Kodama: Faculty of Economics, Meiji Gakuin University, Japan
Shohei Momoda: Graduate School of Humanities and Social Sciences, Hiroshima University, Japan
Masahiro Mikayama: Policy Research Institute, Ministry of Finance, Japan
Tomohiro Iguchi: Policy Research Institute, Ministry of Finance, Japan

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: This study estimates the elasticity of hours worked with respect to hourly wages among female part-time workers to examine the influence of the labor supply. Using data on female part-time workers in Japan from 1998 to 2022, we find that wage elasticity is consistently negative, indicating that higher hourly wages are associated with reduced hours worked. This relationship remains stable across income levels, including those around the tax and social insurance premium thresholds. While taxes and social insurance contributions reportedly play a major role in the adjustment of hours worked, this evidence suggests that these policies are not the primary drivers of working hours adjustments. Further analysis reveals that many women, particularly married women and those in their 30s to 50s, tend to seek additional income to meet economic needs as second earners in their households. When income targets serve as reference points to meet these needs, women often adjust their working hours to reach these targets even under relatively low wage rates. Female part-time workers are more likely to adjust their hours worked in response to income targets rather than to taxes or social insurance premium thresholds. These results suggest that tax and social insurance reforms alone may be insufficient to increase working hours among second earners in Japan.

Keywords: Labor supply elasticity; Second earner; Income target; Tax and social insurance premiums (search for similar items in EconPapers)
JEL-codes: H24 J16 J22 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2025-09
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https://www.mof.go.jp/pri/research/discussion_paper/ron383.pdf First version, 2016 (application/pdf)

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