Earnings and Quality Differentials in For-Profit versus Nonprofit Long-Term Care: Evidence from Japan's Long-Term Care Market

PART I : Are Nonprofit Earnings Differentials Observed in Japan? Evidence from Micro-level Data in Japanese Nursing Homes This research is the first empirical assessment on the wage differentials between the nonprofit sector and profit sector in Japanese nursing homes, and makes use of the Jigyosho Ni Okeru Kaigo Rodo Jittai Chosa (Statistical Survey on Nursing Home Employees) conducted by the Care Worker Support Center Foundation (Kaigo Roudou Antei Center) in September 2000. Theoretically, those who support nonprofit wage premium emphasize the asymmetry of information frequently observed in services sectors and "non-distributional constraint" in the nonprofit enterprises while those who argue that nonprofit wage is lower than for-profit counterparts believe in the voluntary and altruistic characteristics of employees in the nonprofit sectors. Previous studies on the nonprofit premium in the U.S. are inconclusive. We present three major empirical findings. First, our empirical results support to confirm that there is nonprofit wage premium in the long-term care labor market in Japan before and after controlling for nonrandom unobserved self-selection bias. Second, nonprofit firms are more likely to value workers with respect to age as a proxy of market experience and the qualifications as proxies of education than for-profit firms. Third, the long-term care market is segregated between for-profit and not-for-profit facilities in Japan as a consequence of the presence of comparative advantage on workers' self-allocation procedure. More experienced workers with higher level of education, therefore who may provide the higher quality of care, tend to choose working in nonprofit homes because they are more likely to be valued in the not-for-profit sector than the proprietary sector. PART II : Quality Differentials in For-Profit versus Nonprofit Long-Term Care: Evidence from Japanese Micro-level Data This paper aims to evaluate the quality differentials between nonprofit sectors and profit sectors in Japan's long-term care industry by making use of the Jigyosho Ni Okeru Kaigo Rodo Jittai Chosa (Statistical Survey on Nursing Home Employees) conducted by the Care Worker Support Center Foundation (Kaigo Roudou Antei Center) in September 2000. We investigate the difference in the quality of services represented by workers' skills (share of qualified workers and provision of professional training), worker's status (share of regular workers) and stable service supply (job stability and future labor demand) by type of management (for-profit versus nonprofit), which are associated with quality of services. We use the treatment effect model to assess the quality differentials after controlling for various characteristics of each affiliate as well as adjusting for "treatment" effects such as wage rates and non-wage benefits to address the possible selection bias. Our estimates report that nonprofit enterprises are obviously advantageous in stable service supply and the quality of employees associated with the quality of products are not in favor of for-profit facilities. Therefore, our findings demonstrate that for-profit nursing homes, which were allowed to enter the long-term care market after 2000, have not yet been able to catch up with their nonprofit counterparts, which are still dominant in the long-term care industry.