Minimum Wage Effects: Empirical Evidence from Japan

Abstract

Recent empirical studies have improved methodologies for identifying the causal effects of policies especially on a minimum wage hike. This study identifies causal effects of minimum wage hikes across 47 prefectures in Japan from 2008 to 2010 on employment, average hourly wage, work hours, full-time equivalent employment (FTE), total wage costs, average tenure, separation and new hiring in establishments using a micro dataset of business establishments in restaurant, accommodation, and food takeout and delivery industry. Various regression specifications including controls for time-varying regional heterogeneity are implemented by using the bite of the minimum wage in each establishment. First, this study finds that the effects of a revision of minimum wage on employment and FTE in the establishment are statistically insignificant, but the effects on hourly wages and total wage costs are statistically significant. Subsequently, it considers how the establishments react to the increase in total wage costs caused by the revised minimum wage, and finds that separation from the establishment may decrease, and average tenure of workers may increase.