IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/21007.html
   My bibliography  Save this paper

Estimating the Effects of the Minimum Wage Using the Introduction of Indexation

Author

Listed:
  • KAWAGUCHI Daiji
  • MORI Yuko

Abstract

We examine the impacts of the minimum wage on employment using the minimum wage hike induced by the introduction of indexation of the local minimum wage to the local cost of living. The revision of the Minimum Wage Act in 2007 of Japan essentially required the government to set the minimum wage indexed to the local cost of living with a five-year moratorium period. The government subsequently increased the minimum wage in areas where the cost of living was high relative to the local minimum wage. We find that minimum-wage hikes raised the wages of low-wage workers, but reduced the employment of young, less-educated men. A panel analysis based on matched Labour Force Survey data indicates that the minimum-wage hike decreased the job flows of prime-age men and women.

Suggested Citation

  • KAWAGUCHI Daiji & MORI Yuko, 2021. "Estimating the Effects of the Minimum Wage Using the Introduction of Indexation," Discussion papers 21007, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:21007
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/21e007.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jonathan Meer & Jeremy West, 2016. "Effects of the Minimum Wage on Employment Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 500-522.
    2. Kambayashi, Ryo & Kawaguchi, Daiji & Yamada, Ken, 2013. "Minimum wage in a deflationary economy: The Japanese experience, 1994–2003," Labour Economics, Elsevier, vol. 24(C), pages 264-276.
    3. Arindrajit Dube & T. William Lester & Michael Reich, 2016. "Minimum Wage Shocks, Employment Flows, and Labor Market Frictions," Journal of Labor Economics, University of Chicago Press, vol. 34(3), pages 663-704.
    4. Pierre Brochu & David A. Green, 2013. "The Impact of Minimum Wages on Labour Market Transitions," Economic Journal, Royal Economic Society, vol. 123(12), pages 1203-1235, December.
    5. Meer, Jonathan, 2018. "Recent Research on the Minimum Wage: Implications for Missouri," MPRA Paper 93926, University Library of Munich, Germany.
    6. Pedro Portugal & Ana Rute Cardoso, 2006. "Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations," Journal of the European Economic Association, MIT Press, vol. 4(5), pages 988-1013, September.
    7. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," ILR Review, Cornell University, ILR School, vol. 46(1), pages 22-37, October.
    8. Yuji Genda & Ayako Kondo & Souichi Ohta, 2010. "Long-Term Effects of a Recession at Labor Market Entry in Japan and the United States," Journal of Human Resources, University of Wisconsin Press, vol. 45(1).
    9. Daiji Kawaguchi & Yuko Mori, 2009. "Is Minimum Wage An Effective Anti‐Poverty Policy In Japan?," Pacific Economic Review, Wiley Blackwell, vol. 14(4), pages 532-554, October.
    10. Clemens, Jeffrey, 2019. "Making Sense of the Minimum Wage: A Roadmap for Navigating Recent Research," MPRA Paper 94324, University Library of Munich, Germany.
    11. Doruk Cengiz & Arindrajit Dube & Attila Lindner & Ben Zipperer, 2019. "The Effect of Minimum Wages on Low-Wage Jobs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1405-1454.
    12. Clemens, Jeffrey & Wither, Michael, 2019. "The minimum wage and the Great Recession: Evidence of effects on the employment and income trajectories of low-skilled workers," Journal of Public Economics, Elsevier, vol. 170(C), pages 53-67.
    13. Ayako Kondo & Hitoshi Shigeoka, 2017. "The Effectiveness of Demand-Side Government Intervention to Promote Elderly Employment: Evidence from Japan," ILR Review, Cornell University, ILR School, vol. 70(4), pages 1008-1036, August.
    14. Robert Shimer, 2005. "The cyclicality of hires, separations, and job-to-job transitions," Review, Federal Reserve Bank of St. Louis, vol. 87(Jul), pages 493-508.
    15. Peter Brummund & Michael R. Strain, 2020. "Does Employment Respond Differently to Minimum Wage Increases in the Presence of Inflation Indexing?," Journal of Human Resources, University of Wisconsin Press, vol. 55(3), pages 999-1024.
    16. David Card, 1992. "Using Regional Variation in Wages to Measure the Effects of the Federal Minimum Wage," Working Papers 680, Princeton University, Department of Economics, Industrial Relations Section..
    17. Gary Solon & Steven J. Haider & Jeffrey M. Wooldridge, 2015. "What Are We Weighting For?," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 301-316.
    18. R. Kaj Gittings & Ian M. Schmutte, 2016. "Getting Handcuffs on an Octopus," ILR Review, Cornell University, ILR School, vol. 69(5), pages 1133-1170, October.
    19. Yoshio Higuchi, 2013. "The Dynamics of Poverty and the Promotion of Transition from Non-Regular to Regular Employment in Japan: Economic Effects of Minimum Wage Revision and Job Training Support," The Japanese Economic Review, Japanese Economic Association, vol. 64(2), pages 147-200, June.
    20. Okudaira, Hiroko & Takizawa, Miho & Yamanouchi, Kenta, 2019. "Minimum wage effects across heterogeneous markets," Labour Economics, Elsevier, vol. 59(C), pages 110-122.
    21. Mika Akesaka & Yukiko Ito & Fumio Ohtake, 2017. "Impact of Change in Minimum Wage on Employment and Poverty in Japan," ISER Discussion Paper 0999, Institute of Social and Economic Research, Osaka University.
    22. Nordmeier, Daniela, 2014. "Worker flows in Germany: Inspecting the time aggregation bias," Labour Economics, Elsevier, vol. 28(C), pages 70-83.
    23. repec:fth:prinin:300 is not listed on IDEAS
    24. Daiji Kawaguchi & Ken Yamada, 2007. "The Impact Of The Minimum Wage On Female Employment In Japan," Contemporary Economic Policy, Western Economic Association International, vol. 25(1), pages 107-118, January.
    25. Jeffrey Clemens & Lisa B. Kahn & Jonathan Meer, 2021. "Dropouts Need Not Apply? The Minimum Wage and Skill Upgrading," Journal of Labor Economics, University of Chicago Press, vol. 39(S1), pages 107-149.
    26. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kimura, Taro & Kurachi, Yoshiyuki & Sugo, Tomohiro, 2022. "Decreasing wage returns to human capital: Analysis of wage and job experience using micro data of workers☆," Journal of the Japanese and International Economies, Elsevier, vol. 66(C).
    2. Yuji Mizushima & Haruko Noguchi, 2021. "Spillover effects of minimum wages on suicide mortality: Evidence from Japan," Working Papers 2105, Waseda University, Faculty of Political Science and Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. David Neumark & Peter Shirley, 2022. "Myth or measurement: What does the new minimum wage research say about minimum wages and job loss in the United States?," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 61(4), pages 384-417, October.
    2. Arindrajit Dube & Attila S. Lindner, 2024. "Minimum Wages in the 21st Century," NBER Working Papers 32878, National Bureau of Economic Research, Inc.
    3. Garcia-Louzao, Jose & Tarasonis, Linas, 2023. "Wage and Employment Impact of Minimum Wage: Evidence from Lithuania," Journal of Comparative Economics, Elsevier, vol. 51(2), pages 592-609.
    4. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    5. Jaerim Choi & Ivan Rivadeneyra & Kenia Ramirez, 2021. "Labor Market Effects of a Minimum Wage: Evidence from Ecuadorian Monthly Administrative Data," Documentos de Trabajo 18965, The Latin American and Caribbean Economic Association (LACEA).
    6. Yamagishi, Atsushi, 2021. "Minimum wages and housing rents: Theory and evidence," Regional Science and Urban Economics, Elsevier, vol. 87(C).
    7. Radhakrishnan Gopalan & Barton H. Hamilton & Ankit Kalda & David Sovich, 2021. "State Minimum Wages, Employment, and Wage Spillovers: Evidence from Administrative Payroll Data," Journal of Labor Economics, University of Chicago Press, vol. 39(3), pages 673-707.
    8. SATO Kazuma, 2021. "The Impact of the Minimum Wage Increase on Subjective Wellbeing: Evidence from Japan," Discussion papers 21075, Research Institute of Economy, Trade and Industry (RIETI).
    9. Mario Bossler & Hans-Dieter Gerner, 2020. "Employment Effects of the New German Minimum Wage: Evidence from Establishment-Level Microdata," ILR Review, Cornell University, ILR School, vol. 73(5), pages 1070-1094, October.
    10. Neumark David, 2019. "The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns," German Economic Review, De Gruyter, vol. 20(3), pages 293-329, August.
    11. Kim, Ji Hwan & Lee, Jungmin & Lee, Kyungho, 2023. "Minimum wage, social insurance mandate, and working hours," Journal of Public Economics, Elsevier, vol. 225(C).
    12. Laporsek, Suzana & Orazem, Peter F. & Vodopivec, Matija & Vodopivec, Milan, 2019. "Long-Term Responses to Large Minimum Wage Shocks: Sub-Minimum and Super-Minimum Workers in Slovenia," IZA Discussion Papers 12123, Institute of Labor Economics (IZA).
    13. Philipp Berge & Hanna Frings, 2020. "High-impact minimum wages and heterogeneous regions," Empirical Economics, Springer, vol. 59(2), pages 701-729, August.
    14. Jonathan Meer & Jeremy West, 2016. "Effects of the Minimum Wage on Employment Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 500-522.
    15. Cengiz, Doruk & Dube, Arindrajit & Lindner, Attila & Zipperer, Ben, 2018. "The effect of minimum wages on low-wage jobs: evidence from the United States using a bunching estimator," LSE Research Online Documents on Economics 88682, London School of Economics and Political Science, LSE Library.
    16. Arabzadeh, Hamzeh & Balleer, Almut & Gehrke, Britta & Taskin, Ahmet Ali, 2024. "Minimum wages, wage dispersion and financial constraints in firms," European Economic Review, Elsevier, vol. 163(C).
    17. David Neumark, 2017. "The Employment Effects of Minimum Wages: Some Questions We Need to Answer," NBER Working Papers 23584, National Bureau of Economic Research, Inc.
    18. Kunaschk, Max, 2024. "The effects of minimum wages on employment and prices—Evidence from the hairdressing sector," Labour Economics, Elsevier, vol. 88(C).
    19. David Slichter, 2023. "The employment effects of the minimum wage: A selection ratio approach to measuring treatment effects," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(3), pages 334-357, April.
    20. Charles C. Brown & Daniel S. Hamermesh, 2019. "Wages and Hours Laws: What Do We Know? What Can Be Done?," NBER Working Papers 25942, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:21007. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.