Wage Flexibility and Employment Changes

Asao Mizuno

Japanese Economy, 1987, vol. 16, issue 2, 38-73

Abstract: Japan's unemployment rate began to rise on the heels of the first oil shock and has not yet shown a sign of improvement. Nevertheless, it is far lower than the European and American levels. According to recent arguments on macroeconomic performances of the labor market, the principal reason for the low unemployment in Japan may be attributable to the high flexibility of nominal and real wages in the process of business cycles. Other things being equal, flexible wages—more precisely, a sharp fall in the rate of increase of real wages in a recession—lead to stable employment and contribute to reducing an increase in unemployment.

Date: 1987
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DOI: 10.2753/JES1097-203X160238

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