A Comparison of the Wage Structure between the Public and Private Sectors in Japan

Author Name MORIKAWA Masayuki (Vice Chairman & Vice President, RIETI)
Creation Date/NO. June 2013 13-J-044
Research Project Analysis on Service Industries: Productivity, Economic Welfare, and Policy Evaluation
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The public sector is a large service sector, and its efficiency significantly contributes to the overall economic performance. This paper, using micro data from the 2007 Employment Status Survey, compares the wage structure between the public and private sectors in Japan. We do not attempt to compare the overall wage level of the two sectors, but investigate the differences in relative wages by gender, age, education, and region. In addition, we also examine the difference in the dispersion of wages in both sectors. According to the estimation of wage functions, 1) wage gaps by gender and by educational attainment are smaller in the public sector compared with those of private companies, similar to the findings from other advanced countries. 2) The public sector's age-wage profile is steeper than that of the private sector. 3) Regional differences in wage levels are smaller in the public sector. As a result, the wage level of public workers is relatively higher in the rural areas. 4) The variance of wages among workers with similar observable characteristics is the same or somewhat larger in the public sector. In order to ensure efficient provision of public services, it is inappropriate to compare simply the average wage level between the public and private sectors. We should consider the difference in the wage structure by skill level or regional variation.

The English version of this paper is 14-E-060.

Published: Morikawa, Masayuki, 2016. "A Comparison of the Wage Structure between the Public and Private Sectors in Japan," Journal of the Japanese and International Economies, Vol. 39, March, pp. 73-90.