The Union Wage Effect in Japan

22 Pages Posted: 12 Sep 2008

See all articles by Hiromi Hara

Hiromi Hara

Tokyo Center for Economic Research (TCER)

Daiji Kawaguchi

University of Tokyo - Graduate School of Economics


Previous studies point to Japanese labor unions lack of bargaining power that results from their organization at an enterprise level. However, a detailed examination of the institutional setting backed by the Labor Standard Law and Trade Union Law reveals that unions have strong bargaining power against deteriorating work conditions. This paper examines the effect of unions on wages using the Japanese General Social Surveys 2000-2003, which cover a period of economic stagnation. We find a robust union wage premium for both males and females. A CottonNeumark decomposition reveals that about one-fifth of union workers higher wage is explained by the difference in the union and nonunion wage structures. We also can confirm the union wage compression effect using the DiNardo, Fortin, and Lemieux (1996) method. Union workers are likely to think that they will not find jobs with similar compensation packages if they leave their current jobs. In summary, unions in Japan contribute to an increase in the average wage and compress the wage distribution among their workers. This result is reconciled with previous findings by considering the uniqueness of the macroeconomic conditions of the sample period.

Suggested Citation

Hara, Hiromi and Kawaguchi, Daiji, The Union Wage Effect in Japan. Industrial Relations: A Journal of Economy and Society, Vol. 47, Issue 4, pp. 569-590, October 2008, Available at SSRN: or

Hiromi Hara (Contact Author)

Tokyo Center for Economic Research (TCER) ( email )

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Room 703, Main Building
Chiyoda-ku, Tokyo, 1-7-10

Daiji Kawaguchi

University of Tokyo - Graduate School of Economics ( email )


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