Wage Profiles in the Japanese Dual Labor Market

Abstract

This study examines the dual structure of wage formation in regular and nonregular employment sectors in Japan. By using data from a series of surveys conducted in the Tokyo metropolitan area during 2002-2014, two sectoral wage functions and an employment status determination function are estimated simultaneously. The estimated results reveal several facts regarding the new era of the Japanese dual labor market. While the wages of regular workers rise with years of tenure and external experience, those of non-regular workers increase only with the latter. The wage increases owing to experience are of a similar magnitude between employment statuses (except for female regular workers), and the firm-size and educational-background premiums exist only in the regular employees' wages. The study also shows that the slopes of regular workers' wage-tenure profiles have been rather stable for more than 10 years since the early 2000s.