Wage Premiums for Firms' Work-Life Balance Practice: Evidence from Japanese matched firm-worker data

This paper investigates the compensating wages hypothesis for work-life practices, by examining how workers' wages are lowered when work-life balance practices are introduced into the workplace. Two types of data, observed and hypothetical one, reveal the following. First, we find a negative wage premium of about 9% for male workers when estimating wage function based on the treatment-effect model. Second, the answers to hypothetical questions such as "how much of a wage cut is appropriate if work-life balance practices are introduced” indicate a huge gap between workers and firms. Namely, many workers answered that a 0% to 20% wage cut is acceptable, while most of the firms said that a 100% wage cut is necessary or the introduction of work-life balance practice is out of the question. This result may reflect the fact that firms recognize the large cost of the work-life balance practice, and thus the adoption rate of such practice is low in Japan.