Can Capping Overtime Improve Worker Welfare? Evidence from Japan’s 2019 Labor Reform

Daiji Kawaguchi and Kazuha Ogawa

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: This study investigates the effects of the overtime cap introduced in Japan in 2019—set at 360 hours annually (approximately 47 total work hours per week)—on working hours, wages, task allocation, skill investment, side-job engagement, and multiple dimensions of worker well-being. Drawing on panel data from 2015 to 2023, we find that the cap significantly reduced long working hours without adversely affecting wages or skill investment. Additional analysis indicates that firms adjusted primarily through task reorganization rather than by increasing work intensity, while some workers offset reduced working hours by taking on side jobs. Overall, the reform improved self-reported health and work–life balance, though these gains did not translate into higher overall subjective well-being. These results suggest that in labor markets characterized by persistently long working hours, statutory overtime caps can enhance worker welfare without producing adverse labor market consequences.

Pages: 45 pages
Date: 2026-04
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:26034

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