ABSTRACT
This study investigates changes in Japan’s wage structure over the past two decades. The nature of the Japanese labour market during the first decade (1985–1995) could be characterized by what is often referred to as the ‘lifetime employment system’, implying relatively stable employment for which wages tended to rise in line with a longer length of tenure. Following the collapse of the bubble economy in the early 1990s, however, the country experienced new types of employment shock, whereby the nature of the second decade (1995–2005) differed substantially from that of the first decade. This study examines how such types of employment shock affect the wage structure. It primarily focuses on wage differentials by education and the time patterns of those differentials. In fact, a widening of wage inequality in Japan is generally accepted although some economists provide statistical evidence for relative stability in the level of income inequality. 1 This chapter therefore attempts to document the extent of that widening and examines the underlying causes.
