Why wages equalized in the high-speed growth era: Japanese manufacturing, 1961-1969

The decade of the 1960s was an era of rapid wage equalization in Japan. I clarify the process of equalization by estimating the contributions of individual demand and supply factors to it. The main results are as follows. Firstly, much of the shrinkage in wage differentials by age, tenure, and sex is a result of skill-biased technological change: the diffusion of new production methods involving automated lines raised the efficiency of the less experienced, which brought about a large demand shift toward low-wage workers. Secondly, implementing new systems made high levels of cognitive skills requisite, and hereby caused an increase in relative demand for upper secondary school graduates over lower secondary school graduates. But the widening of educational gaps was kept in check by the rapid increase in their supply. Thirdly, workforce aging and increasing attachment provided an auxiliary impetus to the wage equalization. (C) 2003 Elsevier Science (USA). All rights reserved.