A Study of a Decline in Wages in Japanese Service Industries: From experiences in the 1990s and the 2000s

In this article, we examine the change in the wages of regular employed workers through the 1990s and the 2000s using Japanese establishment level data drawn from the Basic Survey on Wage Structure. Contrary to previous literature that found that the wages in the manufacturing industries embedded in internationally competitive markets, particularly with relatively low-wage countries, have faced strong downward pressure, we find that the decline in wages in the service industries was more significant than their manufacturing counterparts during these periods.

The main finding of this article is that wages in the service industries have consistently declined since 1993, while, on the other hand, wages in the manufacturing sector were stable, sometimes even increasing, during the period of 1993 through 2009. Moreover, the rate of decline in wages in the service industries accelerated over time during the respective periods as follows: 3.0% between 1993 and 1998, 7.8% between 1998 and 2003, and 7.9% between 2005 and 2009. We take into consideration the main determinants of this constant decline in wages for each period. From 1993 through 1998, the decline in wages in the service industries was caused by an increase in the share of low-paid, part-time workers in the sector. From 1998 through 2003, the wage of workers declined in almost every service sector and affected every group (sex, age, education, region, firm size) in the sector. In the period of 2003 through 2008, it was caused by a decrease in working hours and an increase in the share of part-time workers in the sector as well.

We also find that the wage differences between male and female workers, and between part-time and full-time workers, narrowed in both the 1990s and the 2000s and in both the manufacturing and service sectors. Another finding is that, though the age-wage profile has been little changed in the manufacturing industries over time, in the service industries, the wage slope flattened in the 2000s, especially for workers in their 20s and 30s, compared to that in the 1990s.