The Effects of Education and Firm Size on Job Satisfaction: Why Japanese and foreign workers are different and why Japan and other countries are different

LIU Yang
Fellow, RIETI

As a result of examining the determinants of job satisfaction using data on general workers in Japanese companies (Note 1), many studies have shown that the educational level of workers and the size of the company they work for both have a positive impact on job satisfaction. However, many overseas studies have reported negative results for these factors. And the results of my analysis using data on foreign workers in Japanese companies were also negative. In other words, controlling for other conditions, the higher the education level of the workers and the larger the size of the company, the lower their job satisfaction tended to be. This column attempts to analyze the causes of these findings.

Overseas research results are the opposite of Japan's

Using data on general workers in Japan, studies showing that the higher the level of education, the higher the job satisfaction include Nozaki (2010; effect of years of education), Ohta (2011; effect of postgraduate degree), Saito (2016; effect of university degree), and Kume, Tsuru, and Toda (2017; effect of years of education). In addition, Ishikawa (1994), Ohashi (2005) and Ota (2011; Table 5) show that the larger the company size, the higher the job satisfaction.

However, many studies using overseas data from ordinary workers have shown the opposite: Clark and Oswald (1996), Clark (1997), Brown and McIntosh (1998), Gazîoğlu and Tansel (2006), and Fabra and Camisón (2009) found that higher levels of education are associated with lower job satisfaction. Results showing that firm size also has a negative impact on job satisfaction were obtained by Idson (1990), Clark, Oswald, and Warr (1996), Lydon and Chevalier (2002), García-Serrano (2011), and Tansel and Gazîoğlu (2014).

The opposite is true for foreign workers in Japan

The results of the author's analysis using data on foreign workers in Japanese companies show that the level of education and the size of the workplace both have a significant negative impact on worker job satisfaction (Note 2). The result is consistent with many overseas studies, but contrary to previous studies in which data are used from general workers who are also working in Japanese companies.

The data used in this study is based on a survey conducted in 2008 by the Japan Institute for Labour Policy and Training (JILPT). The survey covered companies with 300 or more employees and foreign employees (former international students who studied in Japan) working in those companies throughout Japan. 3,018 companies (29.2% valid response rate) and 902 foreign employees responded to the survey. The educational backgrounds of the workers among the valid responses that can be used for quantitative analysis are junior college, four-year undergraduate, master's degree, and doctoral degree. The company size is "Less than 300 employees," "300-499 employees," "500-999 employees," and "1,000 or more employees." One of the characteristics of this data is that these foreign workers are former international students who received advanced education in Japan. Compared to foreigners who came to Japan directly to work, they are more familiar with the Japanese situation and thus have less possibility of bias due to information asymmetry. For the results of the quantitative analysis, as with Japanese workers in previous studies, high wages and corporate work-life balance both had a significant positive impact on the job satisfaction of foreign workers, and the frequency of overtime work by workers was also confirmed to have a significant negative impact when we controlled for job type and industry. However, the results for education level and firm size (300-1,000+ employees) were opposite to those for Japanese workers.

Why both results differ from those of Japanese workers

One of the main reasons may be the low mobility of the Japanese labor market. To understand this, I will first explain how job satisfaction is defined in the field of economics. According to Lévy-Garboua and Montmarquette (2004), job satisfaction is determined by comparing the monetary and non-monetary benefits of a job with the current job and other possible jobs (alternatives). Basic economic models adopt the idea that one is satisfied with one's current job if the benefits from it are higher than those from other possible jobs, and conversely, that one is not satisfied with one's current job if the benefits from it are lower than those from other possible job.

In particular, the other possible jobs are not simply all other jobs that one has heard about, but those that one has access to in their labor market based on one's education and work experience. Therefore, the more educated a worker is, or the more opportunities he or she has to change jobs in the accessible labor market, the more likely he or she is to find another better job. This leads to lower current job satisfaction, because other potential jobs are likely to be more profitable than the current job.

It is important to note that job satisfaction is not the same as subjective well-being related to work: according to Green (2010), satisfaction is primarily compared to other possible jobs, while little comparison is made in determining well-being (Green 2010. p.898). Of course, there is also a measure of relative well-being with respect to work, but the comparison is not necessarily to the job one could possibly have. Furthermore, according to the same literature, job satisfaction predicts labor mobility better than subjective well-being.

Based on this, one of the main reasons for the different research results between Japan and other countries is the difference in external opportunities. Because labor market mobility has been low in Japan for a long time, Japanese workers are less in the habit of changing jobs to advance their careers and find better jobs externally than in many other countries. In contrast, in other countries, career development through changing companies is more common, and workers with more education or who have worked for larger companies are more likely to have better opportunities outside the company, so the probability that the expected benefits of a potential new job will outweigh those of their current job is higher.

The results for foreign workers in Japan are also the opposite of those for Japanese workers, because of the same idea. Since the external opportunities for immigrant workers include the labor market in their home country, the probability that the expected benefits they could obtain through external possibilities will exceed the benefits they receive in their current job compared to Japanese workers is likely to be higher.

Notes on the results and policy implications

As mentioned above, from the perspective of economics, this column has presented one possible cause for why the results of the effects of education and company size on job satisfaction differ between general workers in other countries and general workers in Japan, and why foreign workers in Japan also differ from Japanese workers. In other words, since job satisfaction is determined by comparing the current job with external opportunities, the expected benefits of external opportunities for these foreign workers and foreign workers in Japan are higher than the expected benefits of continuing in their current jobs, as they become more educated or work for large companies. We believe that the result is that the expected benefits from external opportunities exceed the expected benefits from keeping their current jobs, resulting in lower job satisfaction.

In addition to the causes defined by economics analyzed here, there are likely causes related to sociology, psychology, and other fields, but they are not considered here. It should be noted that the results I obtained using data on foreigners are limited to companies with more than 300 to 1,000 employees. In addition, since most of the foreigners working in Japan are from Asia, the same data is mostly for foreigners from Asia. However, the abovementioned overseas studies with similar negative results used mostly data from Europe and the United States, so it is highly likely that people from Europe and the United States have similar experiences to professionals from Asia.

The policy implications are that international migration is increasing worldwide, and many countries have policies to attract the best and the brightest not only from their own countries but from around the world. Job satisfaction plays an important role in worker retention (Freeman 1978, Akerlof et al. 1988, Clark et al. 1998, Levy-Garbous et al. 2007) and has a significant impact on productivity (Böckerman and Ilmakunnas 2012). The analysis in this column has shown that it is necessary to consider the different characteristics of immigrants and natives (especially in the external labor market) when considering methods of increasing workers' job satisfaction. Also, in Japan, it is necessary to devise ways to increase the job satisfaction of foreign workers, because the higher the education level and the larger the company, the lower the satisfaction level tends to be if other conditions remain constant.

December 9, 2021
  1. ^ Because the survey was conducted in Japanese, and because foreigners working in Japan make up a small percentage of all workers, it is likely that the results are mostly for native Japanese citizens.
  2. ^ Partial results for DP (

December 16, 2021