The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994-2003

44 Pages Posted: 29 Jun 2010

See all articles by Ryo Kambayashi

Ryo Kambayashi

Hitotsubashi University

Daiji Kawaguchi

University of Tokyo - Graduate School of Economics

Ken Yamada

Kyoto University

Abstract

The statutory minimum wage has steadily increased for decades in Japan, while the median wage has fallen nominally since 1999 because of a severe recession. We use large micro-data sets from two government surveys to investigate how the minimum wage has affected the wage distribution under unusual circumstances of deflation. The compression of the lower tail of the female wage distribution is largely explained by an increased real value of the minimum wage. Steady increases in the effective minimum wage reduced employment among low-skilled, middle-aged female workers, but the mechanical effect associated with disemployment on wage compression was minimal.

Keywords: minimum wage, wage distribution, wage inequality, employment, deflation

JEL Classification: J23, J31, J38

Suggested Citation

Kambayashi, Ryo and Kawaguchi, Daiji and Yamada, Ken, The Minimum Wage in a Deflationary Economy: The Japanese Experience, 1994-2003. IZA Discussion Paper No. 4949, Available at SSRN: https://ssrn.com/abstract=1631084

Ryo Kambayashi (Contact Author)

Hitotsubashi University ( email )

2-1 Naka Kunitachi-shi
Tokyo 186-8601
Japan

HOME PAGE: http://www.ier.hit-u.ac.jp/English/faculty/kambayashi.html

Daiji Kawaguchi

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

Ken Yamada

Kyoto University ( email )

Japan

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