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Decreasing Wage Returns to Human Capital: Analysis of Wage and Job Experience Using Micro Data of Workers

August 2, 2019
Taro Kimura*1
Yoshiyuki Kurachi*2
Tomohiro Sugo*3

Abstract

Recent literature reports a decrease in wage returns to skills since the 2000s. This paper contributes additional evidence that this trend is also occurring with skills that accumulate through job experience. We use micro data of Japanese workers to analyze this phenomenon by taking advantage of unique Japanese employment practices that emphasize skills acquired through tenure and on-the-job training as important human capital. We find that (1) wage returns to job experience have decreased from the 2000s to the 2010s and (2) decomposing the human capital into general and firm-specific, the returns to both have decreased. We also examine whether the recent trend of firms extending retirement age contributes to the decrease in returns, and we find that its impact has been marginal.

JEL Classification
J20; J24; J26; J30; O33

Keywords
Wage Returns; Skills; On-The-Job Training; General Human Capital; Firm-Specific Human Capital

  1. *1Research and Statistics Department, Bank of Japan
    E-mail : tarou.kimura@boj.or.jp
  2. *2Research and Statistics Department, Bank of Japan (currently at the Personnel and Corporate Affairs Department)
    E-mail : yoshiyuki.kurachi@boj.or.jp
  3. *3Research and Statistics Department, Bank of Japan
    E-mail : tomohiro.sugou@boj.or.jp

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