#97-DOF-28 "Changes in Japan's Seniority Based Wage Structure: 
　　　　　　A Comparative Study Between Industries" 
           (Toshiaki Tachibanaki, Masata Hisatake, April 1998.) 

A WHOLE SENTENCE

ABSTRACT

    Few of the empirical studies concerning Japan's seniority-based 
wage structure have fully analyzed it from a microeconomics viewpoint,
 i.e., by examining the differences between industries, companies, and
so forth. But it is the companies themselves that determine their wage
scales, after considering factors such as business performance, 
business prospects, and management policy. It should also be noted 
that Japanese firms attempt to keep their wages in line with the wages
of other companies in the same industry.
    In this paper the authors analyze Japanese wage structures by 
industry, using a data set on individuals collected for the Basic 
Survey on Wage Structure. Specifically, for the four survey years of 
1979, 1984, 1989, and 1994, we calculated wage functions and 
coefficients by industry and occupation and analyzed chronological 
changes in the data. The results are summarized in the following.
    In the manufacturing sector, changes in the seniority-based wage 
structure differed considerably by industry. In general, the relative 
importance of seniority for blue-collar workers tended to decline 
while it remained about even for white-collar workers.
    Our analysis of white-collar workers in all industries, including 
nonmanufacturing industries, revealed that the seniority-based wage 
structure was declining in the banking and insurance industries. In 
other industries, however, it was basically being maintained up to 
1994.
    One reason for the varying pace of change in wage structures among
industries is growth potential. Our empirical analysis shows that the 
higher an industry's prospective growth rate, the greater degree to 
which the pay scale tended to remain seniority-based.
    Another reason could be the differences in average wage levels 
between industries. We found, for example, that the higher the 
average wage of an industry, the less seniority-based its wage 
structure tended to be.
    This clearly shows that the Japanese seniority-based wage 
structure has undergone some changes in recent years and the changes 
were clearly affected by industry type and occupation.