Unraveling the stagnation of employee pay in Japanese firms: the impact of profit creation, employee productivity, and employee share

Yuanyuan Gong (), Shige Makino, Aqi Liu (), Huanchen Liu () and Jingyi Wang ()
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Yuanyuan Gong: Okayama University
Aqi Liu: China Merchants Group Limited
Huanchen Liu: Nanjing University of Aeronautics and Astronautics
Jingyi Wang: University of New South Wales

Asian Business & Management, 2023, vol. 22, issue 4, No 19, 1743-1772

Abstract: Abstract This study investigated the causes of stagnant employee pay in Japanese firms. By analyzing agency theory and Japanese governance structure, we argue that pay levels are affected by profit creation, employee productivity, and employee share. Dysfunctional processes in these areas can result in pay stagnation. Our findings demonstrate that employee productivity and profit creation have equally significant impacts on pay levels, whereas employee share affects pay only with high employee productivity. These results suggest that the main reason for stagnant employee pay in Japan is not a failure of profit sharing but rather a failure to link corporate and employee capabilities to a firm’s earning power.

Keywords: Employee pay level; Wage stagnation; Compensation strategy; Corporate governance; Profit creation; Employee productivity; Profit allocation; Japan (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41291-023-00228-3

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