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Why Do Real Wages Stagnate in Japan and Korea?

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  • Hyunbae CHUN
  • FUKAO Kyoji
  • KWON Hyeog Ug
  • Jungsoo PARK

Abstract

This study investigates the reasons behind the slowdown in real wages for Japan and Korea based on the aggregate and industry-level data for the respective countries. The findings suggest the following. First, both at aggregate and at industry-level, there is a significant slowdown in both countries in the post-1995 period regarding labor productivity, which explains the overall slowdown in real wages. Second, the main reason for the gap between the growths in real wages and labor productivity is found to be the changes in the labor's terms of trade which is defined as the CPI to GDP deflator ratio. Thus, the wage-labor productivity gap is not systematically connected to changes in labor shares. Finally, to some extent, the overestimation of labor's terms of trade is overstating the slowdown in real wages, especially in Japan.

Suggested Citation

  • Hyunbae CHUN & FUKAO Kyoji & KWON Hyeog Ug & Jungsoo PARK, 2021. "Why Do Real Wages Stagnate in Japan and Korea?," Discussion papers 21010, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:21010
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    File URL: https://www.rieti.go.jp/jp/publications/dp/21e010.pdf
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    Cited by:

    1. Kovács, Olivér, 2022. "Inkluzív kormányzás az ipar 4.0 korában - Japán példája [Inclusive governance in the age of Industry 4.0 - The example of Japan]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 255-277.

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