Wage Developments in Japan: Four Key Issues for the Post-COVID-19 Wage Growth
March 16, 2023
This paper examines various factors that have dampened nominal wage growth in Japan, comparing them with those in the U.S. and Europe, and shows that some of these factors have been changing since around the COVID-19 outbreak. Specifically, we point to the tightening of the labor market conditions partly reflecting demographic trends, the plateauing trend of the part-time worker ratio, signs that the job-to-job transition is becoming more active as wages rise, and an increased consideration of inflation for labor-management wage negotiations. Key issues on the outlook for the pace and durability of nominal wage growth in Japan are (A) whether wages will rise more broadly, including among full-time workers with relatively low mobility, (B) whether firms' growth expectations will increase, boosting investment and leading to higher labor productivity, (C) whether labor mobility will be facilitated by skill upgrading, and (D) whether the situation in which wage increases have been suppressed under the low inflation norm will change so that prices and nominal wages will rise together.
- JEL Classification
- J20, J30
- Wages, Labor market, Prices
The work in this paper was presented at the first session of "Wage Formation Mechanisms in Japan" (November 25, 2022), the Bank of Japan's third workshop on "Issues Surrounding Price Developments during the COVID-19 Pandemic." The authors would like to thank Ryo Kambayashi (discussant), Kosuke Aoki, Takeo Hoshi, Ryo Jinnai, Daishi Kawaguchi, Junko Koeda, Kazuo Ueda, Tsutomu Watanabe, and Bank of Japan staff for their helpful comments and discussions. They also thank Wakako Kaku for assistance in the preparation of the figures, and Orsetta Causa for providing data on labor markets in the U.S. and Europe. The Ministry of Economy, Trade and Industry (METI) provided data from Basic Survey of Business Activities and the Ministry of Health, Labour and Welfare (MHLW) provided data from Basic Survey of Wage Structure. Any remaining errors are attributable to the authors. The views expressed in this paper are those of the authors and do not necessarily reflect the official views of the Bank of Japan.
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