Junya Hamaaki

Changes in the Japanese Employment System in the Two Lost Decades

The authors re-examine developments in two key elements of the Japanese employment system, seniority-based wages and lifetime employment, using recent microdata from the Basic Survey on Wage Structure. In contrast with previous studies, the authors find evidence that these practices are eroding. For seniority wages, for example, they find that the age-wage profile has become flatter in recent years, especially for employees in the middle and final phase of their careers. And for lifetime employment, a clear downward trend has developed since the early 2000s in the share of lifetime employees among younger, university-educated workers. The findings suggest that a growing share of educated younger workers choose to leave indefinite-contract jobs due to the poor prospects for seniority-based wage progression, while older workers choose to stay in their present job despite stagnating wages, because it may be more difficult for them to find alternative employment.