Increases in wages are generally measured by comparing the average wage rate at two points in time. However, shifts in the composition of the workforce over time also influence the wage rate. The increases in the average wage rate result both from a change in what workers do and from more being paid to workers for doing the same amount of work. To obtain a better view of what is happening to wages as their rate of increase declines, the Japan Institute of Labour has used data from the Ministry of Labour's Basic Survey on Wage Structure to estimate net movement in wage rates. It also attempted to measure the net wage disparity between industries and firms using the Laspeyres Wage Index that controls for changes in the composition of the labor force.
Using the Laspeyres Wage Index, the annual increase in the wage rate for 1997 was 0.3 percent. The increase since 1995 was below 0.5 percent. With the Laspeyres Wage Index set at 100 for 1995, the index for 1997 by industry was 99.7 in construction and 100 in finance and insurance. By firm size, the wage increase for large firms was considerable in each year beginning with 1995. For small and medium-size firms, it was large until 1995 but then dropped off considerably in subsequent years.
The Laspeyres Wage Index, on the other hand, was highest at 115.6 in finance and insurance, and lowest at 94.4 in manufacturing, with the total for all industries in 1997 set at 100. However, the value of the index for finance and insurance was lower in 1997 than in 1990. The Laspeyres index by firm size was 100 for firms with 1,000 or more employees, 92.6 for firms with 100-999 employees and 90.7 for those with 10-99 employees. This shows that differences in the composition of the labor force between large and small firms greatly affected wage levels, and that removal of this effect resulted in sharply narrowed wage differentials between firms of different sizes.
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