Nonresponse Bias of Japanese Wage Statistics

Abstract

This article analyzes unit nonresponse bias of establishment surveys, drawing on two major government wage surveys in Japan. We find that unit nonresponse is prevalent among establishments with fewer employees, in urban prefectures, and operating in the service industry. Further, while low-wage establishments are less likely to respond, the resulting bias is quantitatively negligible. Regarding establishment sampling of employees, we find that the sampled establishments randomly choose workers in an appropriate manner. Overall, with proper weighting, nonresponse bias is negligible in Japanese wage statistics to the extent that the mean estimate is concerned. In addition to nonresponse bias, we also assess potential bias due to limited coverage of the sampling population and find substantial bias at the tails of the wage distribution. In particular, excluding corporate executives and establishments with few employees results in an underestimation of wage inequality.