Are Part-time Employees Underpaid or Overpaid? Evidence on productivity-wage gaps in Japan

Author Name MORIKAWA Masayuki (Vice Chairman & Vice President, RIETI)
Creation Date/NO. February 2017 17-J-008
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This study presents empirical findings on productivity-wage gaps of Japanese employees. To be more specific, we estimate production and wage functions to uncover whether part-timers, females, and employees who are university graduates are underpaid or overpaid relative to their productivity. The results indicate that wage levels of part-time and female employees are balanced with their contribution to firm productivity. Since the estimation results indicate the mean value, overpaid and underpaid employees may co-exist at the micro level. However, the parity between mean productivity and wages suggests that firms do not discriminate against specific types of employees and set wages efficiently under market competition. In order to narrow the overall inequality in wages, investments in human capital to enhance the productivity of the lower end of the productivity distribution is essential.

The English version of this paper is 17-E-077.