Are Part-time Employees Underpaid or Overpaid? Productivity–wage gaps in Japan

This study presents empirical findings on productivity-wage gaps among certain groups of Japanese employees. More specifically, we estimate the productivity and wage equations of part-time workers, females, and employees with a university education in order to determine whether they are underpaid or overpaid relative to their productivity. The results indicate that the wage levels of part-time workers and females reflect their contribution to firm productivity. Since the estimations are based on mean values, overpaid and underpaid workers may co-exist at the micro level. However, the parity between mean productivity and wages suggests that firms do not discriminate against these types of employees, and set wages efficiently under market competition. In order to reduce the overall inequality in wages, investments in human capital to enhance the productivity of the lower end of the productivity distribution are essential.

This is the English version of the Japanese Discussion Paper (17-J-008) with some additional information and changes.