Wages and Productivity in Firms using Foreign Trainees

Author Name HASHIMOTO Yuki  (Graduate School of Economics, the University of Tokyo/Japan Soceity for the Promotion of Science (JSPS) )
Creation Date/NO. February 2010 10-J-018
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The Industrial Training and Technical Internship Program is often portrayed as a system through which firms can use foreign nationals from developing countries as substantive low-wage workers. The program is often criticized for functioning as a life-prolonging mechanism for low-productivity firms that should probably withdraw from the market. The overall picture of firms using this program, however, is unclear. Therefore, whether such criticism is valid or not should be considered carefully through a field survey and quantitative analysis.

In this paper, I focus on the level of wages offered to Japanese workers by firms using the program and compare it to the average wage of firms not using the program. Productivity differences between the two are then measured to reveal the characteristics of firms using the program.

Analysis results indicate that, in the manufacturing industry, there is a tendency for firms using trainees to offer lower wages for Japanese workers than those without trainees in the same industry or area. In other words, I was able to confirm that firms that lack competitive wages have a strong tendency to use the program. On the other hand, more than 30% of firms with trainees offer above average wages compared to firms without trainees. It is likely that these firms share workloads efficiently between foreign trainees and Japanese employees leading to higher productivity.