Structural Barriers to Wage Income Growth in Japan: Japan

Selected Issues Papers, May 18, 2023

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Structural Barriers to Wage Income Growth in Japan: Japan

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Bibliographic details

• Authors: Rui Xu, Kaustubh Chahande
• Published: May 18, 2023
• Series: Selected Issues Papers
• DOI: https://doi.org/10.5089/9798400241734.018

Summary

• Stagnant income growth has limited Japan’s growth potential and reflation efforts.
• The paper dissects wage dynamics across different labor groups and identifies structural barriers to income growth.
• Although average income growth has been weak because of the rise of part-time workers and their declining hours, real wages per hour have risen across all labor groups, with the most gain seen among part-time and female workers.
• Weak income growth is largely driven by structural factors, including disincentives for second earners in the social security system, pension policies, and the dual labor market structure.
• Policies to address these structural barriers are key to boosting income growth in Japan.

Findings on wage dynamics

• Average income growth weak due to:
  • rise of part-time workers
  • declining hours for part-time workers
• Real wages per hour:
  • rose across all labor groups
  • largest gains among part-time workers and female workers
• Dual labor market structure contributes to persistent disparities in wage income growth.

Identified structural barriers

• Disincentives for second earners in the social security system.
• Pension policies that affect work incentives and income trajectories.
• The broader dual labor market structure that segments full-time and part-time employment and limits overall wage growth.

Policy implications and recommendations

• Reform social security provisions that create disincentives for second earners to increase labor supply and household income.
• Adjust pension policies to reduce adverse incentives on labor participation and wage progression.
• Address aspects of the dual labor market to narrow gaps between full-time and part-time employment and support more inclusive wage growth.
• Implement policies aimed at sustaining recent gains in real wages per hour for part-time and female workers while facilitating overall income growth.

Publication and metadata

• Authors: Rui Xu, Kaustubh Chahande
• Date: May 18, 2023
• Pages: 15
• Volume: 2023
• Issue: 031
• Series: Selected Issues Paper No. 2023/031
• DOI: https://doi.org/10.5089/9798400241734.018
• Stock No: SIPEA2023031
• ISBN: 9798400241734
• ISSN: 2958-7875

Source: Structural Barriers to Wage Income Growth in Japan: Japan, Rui Xu, and Kaustubh Chahande, May 18, 2023.

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