ESRI Discussion Paper Series No.380 Minimum Wages and Labour Market Dynamics: Evidence from Japan

This paper investigates how the minimum wage affects the wage and labour dynamics of non-regular workers in Japan. While there is little disagreement that the minimum wage raises hourly wages, the previous literature has not yet reached consistent agreement about the impact on employment and little is known about how the labour market is adjusted.This paper estimated three equation models to analyse the impact on hourly wage, job separation, and new hire, respectively. The results suggest three points: (1) positive effect on hourly wages, (2) little evidence for a job-separation increase, and (3) negative and heterogeneous impact on new hiring. These findings imply that the minimum-wage policy is effective to raise the wage of low-paid workers, but policy makers should account for the heterogeneous impact of the minimum-wage revisions after the pandemic to avoid huge job losses.