Regular employment and intergenerational income mobility in Japan

Abstract

Using 1995 and 2005 Survey of Social Stratification and Mobility (SSM), this paper analyzes the effect of being regularly employed on intergenerational income mobility (IGM) from fathers to sons in Japan. Using Two Sample Two Stage Least Square (TS2SLS) method by which fathers’ income is imputed by their characteristics since it is unobservable, intergenerational income elasticity (IGE) between fathers and sons who are employees is estimated, and IGE is decomposed following a well-established framework. Focusing on sons born from 1935 to 1976, this paper finds that IGE increased from 1995 to 2005. The contribution rate of whether being regular employees in current job or not to IGE increased from less than 2% in 1995 to over 9% in 2005, and the increasing in IGE explained by regular employment status accounts for around 30% of increasing in IGE between father and sons who are employees from 1995 to 2005. The dominating reason for this pattern is that it had become difficult for sons from less prosperous families to find regular positions after the collapse of traditional employment structure since late 1990s. This study indicates that “how are people employed” had impeded equality of opportunities for youth and had exacerbated intergenerational transmission of income inequality in Japan.