Minimum Wages and Employment in Japan∗
Yukiko Abe
Hokkaido University

This paper surveys issues associated with the minimum wage and its economic
impacts in Japan. First, I discuss how the minimum wage is discussed in recent
political debates. Next, I explain economic factors surrounding the Japaneselabor market that are related to the minimum wage: specifically, I take up theissues of globalization and “mismatch” (i.e., a labor shortage exists in someindustries and/or occupations and, at the same time, there is unemployment).
Then, I provide an overview of facts regarding the minimum wage for the past
two decades. Finally, I critically review recent empirical studies that examine
the employment effects of the minimum wage (Tachibanaki and Urakawa
2007; Kambayashi, Kawaguchi, and Yamada 2009).

I.

Introduction

In this paper, I provide a general overview of the issues surrounding the minimum
wages in Japan. In doing so, attention is paid to the findings of the previous empirical studies in economics. The minimum wage has recently attracted attention in the public policy
arena because the number of people working under the non-regular (hi-seiki) status has increased, and because concerns about poverty have started to attract more attention than before. I argue that the Japanese economy is going through a major transition because of increasing globalization and demographic changes, and this transition will have implications
for the minimum wage policy.
In the 1990s, the regional (prefectural) minimum wage in Japan was set low compared to the average wages in the region. However, this pattern has been changing since themid-2000s, for two reasons. First, the minimum wage rose after the revision of the law in2007. Second, the average wage has not grown recently. Therefore, I argue that the minimum wage policy in the future should be more cautious about the employment loss than it
has been in the past.
This paper is organized as follows. In the next section, I explain the recent politicalenvironment surrounding the minimum wage in Japan. In Section III, I discuss about recent
economic issues in Japan and their relationship to minimum wage setting. The issues I takeup are (i) the increasing degree of globalization and (ii) shifts in labor demand induced by
the demographic changes. In Section IV, the procedures of the minimum wage setting are
explained. The minimum wage law was changed in 2007, which in turn changed minimum
wage setting from that in the previous times. Then the facts regarding regional wages are*

I thank Keiko Tamada for providing me the data on the minimum wage setting. Errors are myown. This research is supported by the Japan Society for the Promotion of Science Grant-in-Aid for
Scientific Research (grant number C-20530188).

42

Minimum Wages and Employment in Japan

presented. In Section V, the recent empirical studies of the employment effect of the minimum wage are explained, and possible concerns for their interpretations are discussed. In
Section VI, I discuss the issues concerning the minimum wage policy in the future.

II. Political Environment and the Minimum Wage
Raising the minimum wages has been a policy agenda of recent Japanese administrations. Prime Minister Taro Asoh, in his policy speech for the 170th session of the Diet, mentioned the increase of the minimum wage as part of his policy agenda. The Democratic Party of Japan (DPJ) had also made a campaign promise to raise the minimum wages, during
the lower-house election in September 2009, which the DPJ won by a landslide victory.1
The manifesto of the DPJ states that the short-term minimum wage target is 800 yen perhour nationwide and that the medium-term target is 1,000 yen per hour. These politicalmoves have had an impact on the minimum wage level. For instance, Tokyo’s minimum
wage rose from 719 yen in 2006 to 821 yen in 2010, a 14% increase in four years. The details of the recent minimum wage changes are explained in Section III.
As these political events indicate, the minimum wages have been a politically popular
topic. One of the reasons is that it does not require any direct government spending. This is
not surprising because this policy is popular in other countries for exactly the same reason(Card and Krueger 1995, chap. 12). Furthermore, the minimum wage has attracted more
attention in the public policy arena recently than it did in the past, because more people
work in the low-wage labor market and because the high level of poverty in Japan attracted
attention.
At the same time, however, the minimum wage is neither a particularly effective nor aparticularly efficient tool to reduce poverty. These conclusions have been drawn from empirical research conducted in the United States and Japan (e.g., Card and Krueger 1995;
Kawaguchi and Mori 2009). The power of minimum wage is even more limited in Japan
than in other countries because the minimum wage levels in Japan had been low comparedto the market wage. Thus, the minimum wages had not been an effective wage floor (Section III). If the minimum wages do not have much power in countries where they are aneffective wage floor, then a natural inference would be they are less effective where they arenot. On the other hand, however, it is important to note that the minimum wages have become more binding in Japan recently, which might make their functioning closer to that in
the other countries.

III. Economic Environment for Raising the Minimum WageAs explained above, the minimum wages are politically popular. Nevertheless, the1With this victory, the DPJ gained the majority in the lower house, ousting the erstwhile rulingparty—the Liberal Democratic Party (LDP). The LDP had been in power for more than 50 years.

43

Japan Labor Review, vol. 8, no. 2, Spring 2011

economic environment is not as favorable for raising minimum wages. In this section I discuss two factors and their relation with the issue of raising minimum wages.

1. Globalization and the Minimum Wage
Undeniably, globalization has accelerated in the Japanese economy over the past decade. The labor market environment for raising the minimum wages may have changed overthis period. In the past, minimum wages were not binding in the low-wage labor market(Abe 2001; Hori and Sakaguchi 2005). If they are not binding, we do not expect that raisingthem would have discernable effect; they can be raised easily. Since the minimum wages are
farther below the market wages in urban areas than they are elsewhere, the impact in urban
areas would be smaller than it would be elsewhere.
The recent macroeconomic environment, however, is different from this. The Japanese economy has been experiencing deflation, and at the same time, globalization is now
affecting the Japanese labor market to a greater degree than before. Wage are not growing as
much as they did previously: for example, according to the Monthly Labour Survey (Maitsuki Kinro Tokei Chosa, Ministry of Health, Labour and Welfare of Japan), the real wage
index (jissitsu chingin shisu) in 2009 was 94.3, which means that wages in 2009 were 5
percent lower than the level in 2005 (the base year of the index). This is true for both regular full-time workers and part-time workers. Furthermore, Japanese firms are now much
more likely to locate outside of Japan, owing to high corporate tax rates and strong yen.2
Regardless of the causes, jobs seem to be migrating from Japan to overseas locations at anaccelerating rate, and the concern for job loss seems to be more serious than ever. To myknowledge, there is little empirical research that quantifies this effect on the Japanese labormarket. Nevertheless, in such an environment, the logical prediction is that the forces toincrease wages are weak. Although this is true for any wages, it is most relevant for wages
in the low-wage labor market, or wages in sectors that are exposed to international competition (e.g., manufacturing).
Another relevant aspect is the population decline in Japan. Japan’s market size isshrinking: the attractiveness of the Japanese consumers’ market will not be as high as it was
earlier. Japanese or foreign firms have less incentive to locate their establishments in Japan.
This weakens the labor demand in Japan and is not an encouraging factor for wage growth.
The greatest concern for minimum wage policy is that the increase in the minimum
wage costs employment: that is, there will be less employment under higher wages, causing
some who are willing to work to be unable to do so. This issue has induced economists tostudy the employment effects of the minimum wage in a credible, scientific way. The above
issue of job migration from Japan to overseas locations is also a concern for employment
loss. If the government were to reduce corporate tax, it would be introducing a policy that2
Despite the tremendous amount of outstanding government debt, a provision to reduce the statutory corporate tax rate from 30% to 25.5% was included in the 2011 tax reform. The law with thisprovision has been submitted to the 177th session of the Diet.

44

Minimum Wages and Employment in Japan

costs tax money to prevent job loss.3 Although I am not making a quantitative assessmentof the two policies here, when a costly policy is to be implemented, a costless policy shouldbe implemented too. This argument suggests that the reasons for raising the minimum wage
are not strong in the current economic environment.

2. Mismatch and the Minimum Wage
As mentioned in the last subsection, globalization is likely to put downward pressure
on wages in Japan. On the other hand, the demographic changes in Japan have altered thecomposition of labor demand. For instance, the demand for long-term caregivers has increased dramatically over the past 10 years. In the labor market of long-term care workers,
supply falls short of demand: there is a labor shortage. More generally, there are industries
that experience similar labor shortages (e.g., medical care workers such as nurses, and nursing care workers). These service sector industries have recently increased in importanceowing to population aging and increasing labor force participation by women. Wages inthese industries are perhaps not sufficiently high to attract supply to meet demand. Policy
discussions have been that wages of these industries should be raised to attract workers tothese occupations. The reasons for raising wages for these workers are strong; however,raising the minimum wages is not an effective tool for raising wages in these occupations,because their wages are already far above the minimum wages.4

IV. The Movement of the Minimum Wages
1. Minimum Wage Setting in Japan
In this section, the procedures of minimum wage setting in Japan are briefly explained.5 The central minimum wage council sets the “suggested amount of increase(meyasu)” for the regional minimum wages each year. The suggested level is set for four
ranks (A–D), into which the 47 prefectures are classified. This classification has changedslightly over time.6 The meyasu virtually determined the increase every year: from 1993 to
2006, 90% of the minimum wage increases was exactly equal to, 1 yen lower, or 1 yen
3
The reduction in corporate tax, at least in the short run, is likely to reduce the tax revenue. Assuming that the minimum wage change is neutral to government spending, it is possible to argue that
reducing corporate taxes for the sake of keeping jobs in Japan is more costly (due to the loss in tax
revenue) than not raising the minimum wage (which has no effect on government budget).
4
More generally, the minimum wage is probably not an effective tool in affecting the part-timewage to a significant degree. Although the average part-time wage was lower than the average fulltime wage (Abe and Tanaka [2007] report that the part-time/full-time wage ratio for female workers in2001 was 51%), the regional minimum wages were 10–20% lower than the part-time wage. It is unlikely that the minimum wage was a binding constraint as a wage floor. However, this situation may
have changed over time.
5
Detailed explanations are also found in Kawaguchi and Yamada (2007), Kambayashi, Kawaguchi, and Yamada (2009), and Tamada (2009).
6
A relatively significant reclassification occurred in 2005. Aichi and Chiba prefectures, which had
been in the B rank before 2005, have been included in the A rank since then.

45

Japan Labor Review, vol. 8, no. 2, Spring 2011

Table 1. Regional Disparities in the Minimum Wage
Prefecture

1990

2000

2006

2010

minimum wage
in 2010(in yen)
691
750
744
818
745
749
779
734
681
642

1 Hokkaido
0.903
0.900
0.896
0.842
11 Saitama
0.962
0.957
0.955
0.914
12 Chiba
0.962
0.956
0.955
0.906
14 Kanagawa
0.995
0.997
0.997
0.996
23 Aichi
0.969
0.963
0.965
0.907
26 Kyoto
0.962
0.957
0.954
0.912
27 Osaka
0.998
0.994
0.990
0.949
28 Hyogo
0.962
0.954
0.950
0.894
35 Yamaguchi
0.901
0.899
0.898
0.829
47 Okinawa
0.854
0.853
0.848
0.782
Source: Author’s calculation from the minimum wage data.
Note: The entries show the ratio of the regional minimum wage of each prefecture to Tokyo’s
minimum. Tokyo’s minimum in 2010 was 821 yen.

higher than the meyasu amount. Basically, the deviation from the meyasu is slight.
There are heterogeneities in the minimum wage and the average wage levels among
the prefectures within each of the four ranks. For instance, Tokyo is an outlier in the A rank;
Tokyo’s Kaitz index is higher than that of other rank A prefectures. This is true even though
Tokyo’s minimum wage is higher than those of other rank A prefectures (of course, Tokyo’s
minimum wage is the highest of all prefectures in Japan). For another example, Okinawa’s
Kaitz index is higher than other rank D prefectures.
A major legal change took place in the revision of the minimum wage law in 2007:
the new law states that the minimum wage levels should be set so that they are consistent
with the welfare benefit levels in the region. The minimum wages are set at the prefecturallevel, while the welfare benefits are set at the municipal level. Although the welfare benefits
and the minimum wages are set in different schemes, regional disparities of their ratio remained almost constant between 1990 and 2005 (based on the method used in Abe and Tamada [2007]).
The new law, which became effective in 2007, changed this relative constancy in regional minimum wages. From 2007 onwards, the minimum wage increases were not uniform across prefectures, and Tokyo’s increase surpassed increases in other prefectures. Table 1 shows the ratios of the prefectural minimum wages to Tokyo’s minimum wage for theselected prefectures. As indicated in Table 1, the relative minimum wages in regions outside
Tokyo were almost constant between 1990 and 2006, but mostly fell between 2006 and2010 (except for Kanagawa). The new law might have created an opportunity to examine
how changes in the minimum wages affect employment, because the growth in the minimum wage is not uniform across regions.7

7

At the time of writing this paper, however, not much data are available to conduct such an analysis (the data after 2008).

46

Minimum Wages and Employment in Japan

Table 2. Kaitz Index
Rank
in 2010

1990

2000

2007

2009

C
B
A
A
A
A
B
A
B
C
D

0.353
0.319
0.317
0.271
0.306
0.318
0.320
0.306
0.320
0.334
0.367

0.364
0.339
0.323
0.289
0.327
0.329
0.332
0.329
0.321
0.339
0.395

0.383
0.362
0.348
0.290
0.333
0.343
0.343
0.339
0.352
0.366
0.423

0.405
0.378
0.373
0.316
0.368
0.362
0.366
0.357
0.364
0.384
0.441

0.526
0.484
0.467
0.422
0.465
0.505
0.463
0.484
0.493
0.533
0.547

0.553
0.499
0.496
0.414
0.477
0.510
0.488
0.496
0.514
0.547
0.539

0.546
0.532
0.517
0.442
0.497
0.524
0.500
0.490
0.505
0.522
0.554

Derived from male average wage
Hokkaido
Saitama
Chiba
Tokyo
Kanagawa
Aichi
Kyoto
Osaka
Hyogo
Yamaguchi
Okinawa

Derived from female average wage
HokkaidoC
0.552
Saitama
B
0.506
Chiba
A
0.483
Tokyo
A
0.437
Kanagawa
A
0.471
Aichi
A
0.519
Kyoto
B
0.488
Osaka
A
0.494
Hyogo
B
0.495
YamaguchiC
0.552
OkinawaD
0.551
Source: Author’s calculation from aggregate data of the BSWS.

2. Kaitz Index
The Kaitz index is used for measuring the real level of minimum wage. It is definedas the ratio of the minimum wage to the mean (average) wage. The idea of dividing by themean wage is to adjust the minimum wage as its ratio to the local wage. In some studies, themedian wage, instead of the mean wage, is used as a denominator. Below, I report the
movement of the Kaitz index in Japan from 1990 to 2010. The wage data are from the aggregate data of the Basic Survey of Wage Structure (BSWS). To observe the different wage
growth patterns for male and female workers, I report two Kaitz indices, one using the mean
wage of male full-time workers and the other using the mean wage of female full-timeworkers.8
As a result of the minimum wage setting up to 2006, the minimum wages moved in

8

Full-time workers here are “ippan rodo sha” in the BSWS. The average wages are derived fromthe contractual earnings (shoteinai kyuyo) divided by regular monthly hours. Since they are calculated
from aggregate data, they are the hours-weighted average wage of individual workers’ hourly wage
rates.

47

Japan Labor Review, vol. 8, no. 2, Spring 2011

proportion to the general wage increase, with a short lag. There is almost no time at which
the Kaitz index changed its value significantly in an unforeseen fashion.9 This is becausechanges in the Kaitz are caused by across-region differences in the growth of the average
wage and not by the minimum wages. The changes in the average wage take place gradually.
How did this new law change the Kaitz index? Table 2 shows the Kaitz index between 1990 and 2009 for prefectures that contain large metropolitan areas and for several
other areas (Hokkaido, Yamaguchi, and Okinawa). The Kaitz index is lowest in Tokyo in all
years shown, for both males and females. It is high in Okinawa for both males and females.
The level of the Kaitz index increased after 2007. For the entire period shown here, the index derived from male wages has been increasing more significantly than that derived fromfemale wages. This is because female wages grew faster than male wages did.

3. Wage Floor? The Level of the Minimum and the Actual Wage
Abe (2001) and Hori and Sakaguchi (2005), among others, point out that minimum
wages have not been a binding constraint for wage setting in the Japanese labor market,
especially in urban areas. They show that the proportion of workers whose hourly wage
rates are close to the minimum wage is low. Let hw represent the hourly wage rate of anindividual worker, and let MW represent the regional minimum wage. Hori and Sakaguchi(2005) report that, in 2003, for 3.6% of part-time workers in Tokyo, hw < 1.05*MW holds.
Of these, 2.0% receive wages below the minimum (non-compliance). If we regard the term“binding” to refer to the law being enforced in such a way as to barely meet the requirement,
the proportion of part-time workers for whom the minimum wage is “binding” was 1.6%.
The same proportion was 0.1% for full-time workers in Tokyo in 2003 (Hori and Sakaguchi[2005], tables 3-3 and 3-4).
It is no wonder, therefore, that the minimum wages could be easily raised over the
past four years in Tokyo, where the Kaitz index had the lowest value among the 47 prefectures. The minimum wages of Tokyo and Kanagawa in 2010 exceeded the national-levelgoal set by the DPJ in 2009 (800 yen).10

4. Minimum Wage during the Deflation Era
From the late 1990s to the early 2000s, the Japanese economy experienced deflation.
The manner in which the minimum wages operated in the labor market during this uniqueperiod of deflation is of interest. The minimum wage usually prevents wages from falling
below the minimum. However, the non-binding minimum wages in Japan’s urban areas
allowed wages to fall during the deflation period, while a decline did not take place in nonurban areas where the minimum is binding.
9
These are the kind of variations in the minimum wages that are used to measure the employment
effect of the minimum wage.
10
Yet they are still far below 1,000 yen per hour, the medium-term target.

48

Minimum Wages and Employment in Japan

Source: Author’s calculation from the microdata of the General Survey of Part-Time Workers’
Conditions (Ministry of Health, Labour and Welfare). Reprinted from Abe (2007).
Note: The sample is female part-time workers who are senior high school graduates.

Figure 1. The Log-Difference between the 10th Percentile of the Wage
Distribution and the Minimum Wage
Part-time wages fell against regional minimum wages during the late 1990s in Japan’surban areas. This is seen in Figure 1, in which I plot the log difference between the 10th
percentile of the wage distribution and the minimum wage, for the sample of female parttime workers who are senior high school graduates. The 10th percentile of part-time wage
distribution fell relative to the minimum wage in the rank A region between 1990 and 2001,
while it stayed almost constant in the rank D region. More generally, using the sample of all
workers rather than just part-time workers, Kambayashi, Kawaguchi, and Yamada (2009)
report that the wage distribution in Aomori and Tokyo shifted toward the minimum wage
from 1994 to 2003. The minimum wage has probably become more binding over time.

V. Minimum Wage and Employment
1. Empirical Methodology
Since the 1990s, the empirical literature on the minimum wage has employed an “experimental approach,” in which the minimum wage hike in a region is taken as an experiment (see Card and Krueger 1995 and Neumark and Washer 2008). In this type of study, theemployment outcomes of affected regions (i.e., the regions that experience a minimum
wage increase—the treatment group) and those of unaffected regions (i.e., the regions that49

Japan Labor Review, vol. 8, no. 2, Spring 2011

do not experience a minimum wage increase—the control group) are compared. This approach is well-known as the “difference in differences (DID)” approach, and is widely usedin other empirical applications. However, an immediate application of this approach to theJapanese case is not straightforward.
As shown in the previous section, Japan’s unique institutional feature is that the minimum wage growth rates were virtually constant across regions up to 2006. This would
make the simple experimental approach impossible: since the minimum wages of all regions
increase at the same rate, there are not obvious “treatment” and “control” groups to which to
apply the DID approach. A somewhat more subtle approach would be to use variations in
the Kaitz index (or its variant) on the employment-population ratio (E-P ratio).11 In thiscase, the variations in the Kaitz index are caused by different growth rates in the average
wage across regions. Such an approach is adopted by Tachibanaki and Urakawa (2007) andKambayashi, Kawaguchi, and Yamada (2009).12

2. Is Causal Interpretation Possible?
In my view, there are several difficulties in identifying the minimum wage impact on
employment in Japan by using data from before 2006. First, as discussed above, variationsin the Kaitz index are small because the cross-regional variations are caused by the movement in the average wage and not by the minimum wages. Second, since the data are unavailable in short intervals, it is difficult to measure the effect at the precise time of a minimum wage increase. Third, employment has regional variations or region-specific trends,
especially for females. This is relevant because previous studies primarily examined theemployment outcomes of females.13
As a result, the measured effects of the regressions might be the minimum wage effect, but at the same time, these effects could be picking up a cross-sectional variation in the
E-P ratio or a general trend, that is correlated with variations in the Kaitz index. These concerns are especially relevant because the movement in the minimum wage in Japan is gradual and not discontinuous.
The second and the third problems are related. A large-scale dataset is needed to calculate the E-P ratio at the prefecture level. However, it is difficult to obtain these data for anarrow time period. The Labour Force Survey is a monthly survey, but the sample size is
too small for prefecture-level analysis. Therefore, previous studies have used the Employ11

This approach has also been adopted in the state-level panel data analyses in the United States.
Although the analysis by Abe and Tamada (2010) is somewhat close, it is a study to measure thelabor supply elasticity rather than the minimum wage impact.
13
Another possible concern is that the E-P ratio is calculated for a broad population and may not
capture the effect specific to the low-wage labor market. For instance, the group of women with seniorhigh school education or less includes many (potential) low-wage workers. Nonetheless, approximately 30% of senior high school graduate women work as regular full-time employees, receiving hourly
wages that are probably higher than the minimum wage. They are less likely to be affected by theminimum wage.
1250

Minimum Wages and Employment in Japan

ment Status Survey (ESS). However, this survey is conducted every five years, making it
difficult to measure the impact of minimum wage around the time of the rise. Perhaps more
importantly, it is difficult to separate the minimum wage effects from the cross-sectionalcorrelation or from long-term trends, regardless of their causes.
Two previous studies (Tachibanaki and Urakawa 2007; Kambayashi, Kawaguchi, andYamada 2009) have examined how the minimum wage increase affected women’s E-P ratio.
Tachibanaki and Urakawa (2007) report that that female employment is positively related(although not significantly, in a statistical sense) to the Kaitz index and argue that employment loss due to the minimum wage is not warranted. Kambayashi, Kawaguchi, and Yamada (2009), on the other hand, find a negative relationship, although the effects are not significant statistically. Below, I review these results closely.

3. Tachibanaki and Urakawa (2007)
Tachibanaki and Urakawa use the aggregate ESS data from 2002 and run crosssectional regression equations that regress the E-P ratio of women on the Kaitz index andother covariates. The unit of observation is the combination of prefecture and age group.
They find that the minimum wages do not have much effect on the E-P ratio.
A potential problem with this regression is that the regional variations in women’s EP ratio are large in a cross section (Takeishi 2007; Abe, Kondo, and Mori 2008; Unayama
2009a, 2009b; Abe 2011). In particular, the E-P ratio in the northern-coastal prefectures ismuch higher than that in the rest of Japan, irrespective of age and educational attainment(Abe 2011). Northern coastal prefectures are low-wage areas; of the seven prefectures in thenorthern-coastal region, three have been classified into the D rank, three have been includedin the C rank, and the remaining one has been in the B rank since 2005.14 Low-wage areas
have high values of the Kaitz index because the minimum wages are high relative to theaverage wages (Abe 2001, Kawaguchi and Yamada 2007, Kambayashi, Kawaguchi, andYamada 2009). The positive effect of the Kaitz index on the E-P ratio of women might reflect the fact that regions with high participation by women have high minimum wages (relative to the average wages).
There are problems with interpreting this correlation between the Kaitz index andwomen’s employment as the effect of minimum wages. Most importantly, the regional variations in women’s participation are a long-lived phenomenon, and are not caused by minimum wages. Second, the high E-P ratio in the northern coastal region is the result of highregular employment by women and not that of part-time employment. Minimum wages are
more likely to affect part-time employment than full-time employment, if it affects employment at all.15 The findings of Tachibanaki and Urakawa may not measure the causal
14

Toyama has been reclassified into Rank B since 2005; this prefecture was included in Rank Cfrom 1990 to 2004.
15
Furthermore, the high E-P ratio in the Northern coastal region is the result of high participation
by married women with children (Abe 2011). There is no a priori reason to assume that minimum

51

Japan Labor Review, vol. 8, no. 2, Spring 2011

impact of minimum wages but merely reflect the incidental correlation between longstanding regional differences in labor force participation and the high level of minimum
wages.

4. Kambayashi, Kawaguchi, and Yamada (2009)
The study by Kambayashi, Kawaguchi, and Yamada uses the ESS data from two
points in time (1997 and 2002) to measure how the E-P ratio of women with a senior highschool education or less is related to the Kaitz index. Since it uses the two points in time,and since prefecture effects are controlled for, this study is free from the problem of interregional variations in women’s employment that I point out above regarding the Tachibanaki and Urakawa study.
Nevertheless, the presence of unique trends in the E-P ratio across regions is a potential concern. That is, if women’s participation behavior changed over time in different ways
in different regions for reasons other than the minimum wage, the regression coefficient
might pick up a correlation between this trend and the Kaitz index. For this application, thespecific concern is the higher increase in women’s participation in urban areas than that in
non-urban areas. As mentioned above, women’s participation had been notably high in the
non-urban areas of the northern coastal regions. However, perhaps due to the Equal Employment Opportunity Law for men and women, as well as general increases in demand forfemale labor, the E-P ratio of young women (aged 40 or younger) increased significantly inTokyo. On the other hand, the increase was modest in the areas that had traditionally highparticipation. This means that the trend in female employment is greater in urban areas thanin non-urban areas. This trend is possibly correlated with the change in the Kaitz index during the same period, although it has little to do with the changes in minimum wages. This
point is perhaps more relevant because the Kambayashi, Kawaguchi, and Yamada’s study
uses data from only two points in time.16

VI. Summary
In this paper, I review issues related to the recent minimum wage policy in Japan. In
doing so, I also summarize the findings of economics literature on the minimum wage. The
main conclusions regarding the future minimum wage policy are as follows.
wage effects are concentrated in particular demographic groups, unless the employment of those demographic groups is disproportionably concentrated in minimum wage jobs.
16
Another possible concern of studies using the ESS data is migration across areas. Since the ESS
is conducted only every five years, it is possible that people have migrated across areas during thefive-year interval. This is especially so for young people, who migrate from non-urban areas to urban
areas. For instance, Abe (2011) shows that the population decrease in the northern-coastal region ismore rapid than in other non-urban areas. The ESS data are affected by migration across regions, although we normally do not expect that small increases in the minimum wages affect inter-regionalmigration in Japan.

52

Minimum Wages and Employment in Japan

Concern for employment loss is acute, reflecting the increasing degree of globalization. If the location choices of firms are responsive to local wage levels, then raising theminimum wages may discourage firms from locating in Japan.
In the past, the minimum wages were not been binding constraints for wage setting in
the Japanese labor market. However, they have gradually become binding after the mid2000s. This is both because the minimum wage rose after the revision of the law in 2007
and because the average wage has not grown recently. Together with the fact that increasing
globalization may induce jobs to migrate from countries with high wages, the minimum
wage policy in the future should probably be more cautious about the employment loss thanit has been in the past.
The minimum wage cannot bridge some of the important wage gaps. For instance,
certain service sector industries (long-term caregivers, nursing caregivers) face labor shortages even when the unemployment rate is not low. However, the minimum wage cannot
effectively resolve this type of “mismatch.” In addition, the minimum wage is not an efficient means to reduce poverty. This is because minimum wage workers are not necessarily
members of poor households.

References
Abe, Yukiko. 2001. Chiikibetsu saitei chingin ga pato chingin ni ataeru eikyo [The effect ofregional minimum wages on part-time wages]. In Koyo seisaku no keizai bunseki[Economic analysis of labor market policies], ed. Inoki Takenori, and Fumio Ohtake.
Tokyo: University of Tokyo Press.
———. 2007. Pato rodosha no chingin bunpu ni kansuru kenkyu [A study on the wage distribution of part-time workers]. In Shugyo kankyo to rodo shijo no jizokuteki kaizen ni
muketa seisaku kadai ni kansuru chosa kenkyu hokokusho [Research report on policies
toward continuous improvement in working conditions and the labor market]. Tokyo:
Institute of Statistical Research.
———. 2011. Regional variations in labor force behavior of women in Japan. Mimeo,
Hokkaido University.
Abe, Yukiko, and Aiko Tanaka. 2007. Seiki-pato chingin kakusa to chiikibetsu saitei chingin
no yakuwari—1990nen-2001nen [The full-time/part-time wage gap in Japan and therole of the regional minimum wage: 1990-2001]. The Japanese Journal of Labour
Studies 49, no. 11:77-92.
Abe, Yukiko, and Keiko Tamada. 2007. Saitei chingin, seikatsu hogo gaku no chiikisa ni
kansuru kosatsu [On the regional differences in minimum wages and welfare benefits
in Japan]. The Japanese Journal of Labour Studies 49, no. 6:31-47.
———. 2010. Regional patterns of employment changes of less-educated men in Japan:
1990–2007]. Japan and the World Economy 22 (2): 69–79.
Abe, Yukiko, Shiori Kondo, and Kunie Mori. 2008. Josei shugyo no chiikisa ni kansuru
53

Japan Labor Review, vol. 8, no. 2, Spring 2011

kosatsu: Shukei deta wo mochiita seiki koyo shugyoritsu no bunseki [On regional differences of women’s labor supply: An analysis of the regular employment ratios using
aggregate data]. Japanese Journal of Research on Household Economics 80:64–74.
Card, David E., and Alan B. Krueger. 1995. Myth and measurement: The new economics ofthe minimum wage. Princeton, N.J. : Princeton University Press.
Hori, Haruhiko, and Naofumi Sakaguchi. 2005. Nippon ni okeru saitei chingin no keizai
bunseki [Economic analysis on the minimum wages in Japan]. JILPT Research Report
no. 44, The Japan Institute of Labour, Policy and Training, Tokyo.
Kambayashi, Ryo, Daiji Kawaguchi, and Ken Yamada. 2009. The minimum wage in a deflationary economy: The Japanese experience, 1994–2003. Global COE Hi-Stat Discussion Paper Series 074, Hitotsubashi University, Tokyo.
Kawaguchi, Daiji, and Ken Yamada. 2007. The impact of the minimum wage on female
employment in Japan. Contemporary Economic Policy 25 (1): 107-18.
Kawaguchi, Daiji, and Yuko Mori. 2009. Is minimum wage an effective anti-poverty policy
in Japan? Pacific Economic Review 14, no. 4:532-54.
Neumark, David, and William L. Wascher. 2008. Minimum wages. Cambridge, Mass.: MIT
Press.
Tachibanaki, Toshiaki, and Kunio Urakawa. 2007. Nihon no hinkon kenkyu [Study on poverty in Japan]. Tokyo: University of Tokyo Press.
Takeishi, Emiko. 2007. Makuro deta de miru josei no kyaria no hensen to chiiki kan hikaku[Transitions of women’s career and inter-regional comparison]. Lifelong Learning andCareer Studies 4:19-34.
Tamada, Keiko. 2009. Saitei chingin ha donoyoni kimatte irunoka [The eterminants of theminimum wages in Japan. The Japanese Journal of Labour Studies 51, no. 12:16–28.
Unayama, Takashi. 2009a. Kekkon sokushinsaku to shite no hoikujo no seibi ni tsuite [Increasing supply of childcare resources for promoting marriage]. Research Report, Japan Center for Economic Research, Tokyo.
———. 2009b. Shoshi koreika taisaku to josei no shugyo ni tsuite: Todofuken betsu detakara wakarukoto [Policies toward aging and low fertility and labor force participationof women: Evidence from prefecture-level data]. RIETI Discussion Paper Series 10J004, The Research Institute of Economy, Trade and Industry, Tokyo.

54