Wage Gap between Permanent Workers and Fixed-term Workers in Japan

This paper examines the wage gap between permanent workers and fixed-term workers and investigates the extent to which human capital and types of occupation explain it by applying the Blinder-Oaxaca decomposition method using a web-based survey. Our results show that the average hourly wage of fixed-term workers is 36.5% lower than that of permanent workers. The hourly wage difference is 32.4% and 16.6% for males and females, respectively. However, when controlling for individual characteristics such as education, age, tenure, and types of occupation, an hourly wage of fixed-term workers is 8.8% lower than that of permanent workers. The wage difference between permanent and fixed-term workers among males is 8.4%, and it disappears among females when the individual characteristics are controlled for. Our results indicate that the wage gap between permanent and fixed-term workers in Japan is almost the same as or even smaller than that in European countries. Results obtained from the Blinder-Oaxaca decomposition method show that the wage gap between permanent and fixed-term workers is mainly explained by tenure and types of occupation for male workers, and by types of occupation and education for female workers.