In this article, we analyze the online job posting market for regular workers in Japan using online job postings data to provide new insights into the labor market.
Understanding the trends in labor market conditions and wages is essential for assessing the state of the economy. However, the Japanese labor market is characterized by a “dual structure” of regular and non-regular workers, making it difficult to grasp the full picture with limited statistics.
I. Introduction
The Bank of Japan‘s latest working paper “Labor Market of Regular Workers in Japan: A Perspective from Job Advertisement Data” analyzes the labor market conditions and wages for regular workers in Japan using online job advertisement data from 2015 to 2022. The paper sheds light on several aspects of the labor market that cannot be captured by official statistics, including the decline in the job-filling rate and the increase in the skill requirements of firms. Additionally, the analysis reveals that posted wages are rising under tightening labor market conditions, with demand for high skilled workers as the primary driver. The paper also discusses the spillover effects of rising posted wages on the average wages of regular workers. Overall, this working paper provides new insights into the Japanese labor market and its response to changing economic conditions.
According to the analysis of online job advertisement data from 2015 to 2022, the decline in the job-filling rate in Japan is driven by an increase in the skill requirements of firms. This is related to the observed acceleration in the accumulation of intangible assets, which has a complementary effect in raising demand for highly skilled workers.
According to the analysis of labor market tightness and wages for regular workers in Japan using online job postings data, several insights can be gained.
- First, the job-filling rate has been declining, which suggests that firms may be facing greater difficulties in hiring workers than indicated by macro indicators such as the jobs-to-applicants ratio.
- the decline in the job-filling rate is in part driven by an increase in the skill requirements of firms.
- Third, posted wages are clearly rising under tightening labor market conditions, driven by an increase in demand for highly skilled workers. Fourth, an increase in posted wages spills over to the average wages of regular workers with some time lag.
The analysis also suggests the existence of spillover mechanisms, such as a channel in which firms raise wages in order to retain workers as it becomes easier for them to move to higher paying jobs, and a channel in which firms raise wages for fairness consideration as newly hired workers are paid high wages within the firm.
Importance of understanding labor market conditions and wages
Understanding labor market conditions and wages is important in relation to the decline in the job-filling rate in Japan because it helps to assess the state of the economy. The decline in the job-filling rate suggests that firms may be facing greater difficulties in hiring workers than indicated by macro indicators such as the jobs-to-applicants ratio.
By analyzing online job postings data, we can obtain highly granular information at the individual job level such as offered wages, which can help to analyze labor tightness and its drivers, as well as the impact of changes in labor tightness on posted wages. This information can also help to identify trends in the labor market, such as the growing demand for highly skilled workers among firms, which is driving the decline in the job-filling rate.
Characteristics of the Japanese labor market
The Japanese labor market is characterized by a “dual structure” of regular and non-regular workers, which has different wage determination mechanisms. Wages of regular workers tend to be less responsive to fluctuations in labor market conditions due to long-term contracts, seniority-wage system with low labor mobility. However, in recent years, the labor mobility of regular workers has been increasing, especially among younger workers, and there is also a trend toward adopting job-type employment (as opposed to traditional membership-type employment).
Use of online job postings data for analysis
Online job postings data can be used to analyze labor tightness and its drivers, as well as the impact of changes in labor tightness on posted wages in Japan by providing highly granular information at the individual job level such as offered wages. By analyzing the job-filling rate, which is the ratio of online job postings that are actually filled by applicants, it is possible to understand the level of labor tightness faced by firms. Additionally, changes in the job-filling rate can be used to identify changes in labor tightness over time.
The analysis can also reveal the drivers of labor tightness, such as an increase in skill requirements of firms, which can be related to the observed acceleration in the accumulation of intangible assets and R&D investments. Finally, the analysis can show how changes in labor tightness affect posted wages and how these changes spill over to the average wages of regular workers.
II. Labor Market Tightness
Labor market tightness refers to the degree of difficulty that firms face in hiring workers. In Japan, online job posting data can be used to analyze labor market tightness by examining the ratio of job postings matched to job applicants (job-filling rate). This rate has been declining in recent years, suggesting that firms may be facing greater difficulties in hiring workers than indicated by macro indicators such as the jobs-to-applicants ratio.
Additionally, the decline in the job-filling rate is in part driven by an increase in the skill requirements of firms, which is related to the observed acceleration in the accumulation of intangible assets, and has a complementary effect in raising demand for high-skilled workers. By analyzing online job postings data, researchers can obtain highly granular information at the individual job level such as offered wages, which can be used to analyze labor tightness and its drivers, as well as the impact of changes in labor tightness on posted wages.
The declining job-filling rate suggests a tighter labor market than indicated by official statistics
According to the analysis the decline in the job-filling rate is driven by the increase of skill requirements of Japanese firms. This is related to the observed acceleration in the accumulation of intangible assets and R&D investments, which has a complementary effect in raising demand for high skilled workers.
The declining job-filling rate suggests that firms in Japan may be facing greater difficulties in hiring workers than indicated by macro indicators such as the jobs-to-applicants ratio. This means that the labor market may be tighter than what official statistics suggest.
Increase in skill requirements of firms driving the decline in the job-filling rate
According to the paper, the decline in the job-filling rate in Japan is driven by an increase in the skill requirements of firms. This is related to the observed acceleration in the accumulation of intangible assets, which has a complementary effect in raising demand for highly skilled workers.
Additionally, the decline in the job-filling rate suggests that it is becoming more difficult for firms to hire workers than is indicated by the jobs-to-applicants ratio due to the decline in matching efficiency.
Relationship between skill requirements and accumulation of intangible assets
The analysis suggests that the increase in skill requirements of firms is related to the observed acceleration in the accumulation of intangible assets in Japan. Specifically, the results show that investments in intangible fixed assets to promote digitalization by firms and R&D expenditures in fast-growing areas have a complementary effect in increasing demand for high-skilled jobs.
The estimated coefficients for intangible fixed assets and R&D expenditures are relatively larger compared to fixed tangible assets, indicating that the former has a stronger effect on the demand for highly skilled labor. Therefore, it can be inferred that the increase in skill requirements of firms is partly driven by the growing demand for highly skilled workers due to increased investment in intangible assets backed by digitalization demand.
III. Posted Wages
Analyzing posted wages using online job postings data can help to analyze labor tightness and its drivers in the Japanese labor market in several ways. First, it provides highly granular information at the individual job level, such as offered wages, which is not available in traditional statistics. Second, it allows for the analysis of the relationship between posted wages and the average wages of regular workers, which can provide insights into the spillover effects of posted wages on the broader labor market.
Third, it can capture trends in labor market conditions and posted wages, such as the job-filling rate and skill requirements of posted jobs, which can help to identify drivers of labor tightness and wage growth. Overall, analyzing posted wages using online job postings data can provide valuable information for assessing the state of the Japanese labor market and understanding its dynamics.
Acceleration in posted wages
The analysis of online job postings data in Japan shows that posted wages have accelerated, particularly for high-skilled job postings, and that this increase in posted wages is driven by an increase in demand for high-skilled workers. The analysis also suggests that increases in posted wages have an effect to push up the average wages of regular workers with some time lag. The paper demonstrates that posted jobs contain valuable information in assessing future trends in the wages of regular workers.
Sensitivity of posted wages to labor market tightness
According to the analysis, posted wages in the Japanese labor market are more responsive to labor tightness compared to wages of regular workers. The analysis suggests that as labor market conditions tighten, posted wages tend to increase. This increase in posted wages is widespread across a range of industries, occupations, firms, and regions, and they are particularly larger in professional and engineering jobs and the IT industry.
The analysis also suggests the existence of channels in which firms raise wages in order to retain workers as it becomes easier for them to move to higher paying jobs and for fairness consideration as newly hired workers are paid high wages within the firm. Overall, the context suggests that posted wages in the Japanese labor market are sensitive to changes in labor market tightness.
Increases in demand for highly skilled workers as the primary driver for rising posted wages
According to the context, the primary driver for the rising posted wages in the Japanese labor market is the increase in demand for highly skilled workers. As the demand for high skilled workers increases, the wages of high-skilled job postings are also increasing relative to other job postings. This is supported by the observed acceleration in the accumulation of intangible assets and R&D investments, which has a complementary effect in raising demand for skilled workers.
IV. Spillover to Average Wages
Analyzing posted wages using online job postings data provides insights into the spillover effects of posted wages on the broader labor market in the Japanese labor market in several ways. First, it allows for the measurement of labor tightness and trends in posted wages, which are more responsive to labor tightness than the average wages of regular workers. Second, it enables the identification of the skill requirements of posted jobs and the relationship between demand for high skilled workers and rising posted wages.
Third, it shows that an increase in posted wages has a spillover effect to push up the average wages of regular workers with some time lag, through channels such as firms raising wages to retain workers and for fairness consideration.
Overall, analyzing posted wages using online job postings data provides valuable information for assessing future trends in the wages of regular workers and understanding the wage determination mechanism in the Japanese labor market.
An increase in posted wages has effect on average wages of regular workers with some time lag
According to the context, there is a time lag involved in the effect of an increase in posted wages on the average wages of regular workers in the Japanese labor market. The time-series analysis suggests that changes in posted wages spill over to regular workers with some time lag. Therefore, the recent high growth of posted wages is likely to push up wages for regular workers over the next 6 months to 1 year.
Based on the 12-month forward-looking forecast model estimated, the recent increase in posted wages is expected to push up the growth rate of average wages of regular workers by about 0.17 percentage points over the next year.
Channels for spillover: retention and fairness considerations
The spillover mechanisms from posted wages to average wages of regular workers in the Japanese labor market are classified into two types of effects: the external pressure effect and the internal pressure effect. The external pressure effect is related to the literature on the relationship between outside options and workers’ wages, where an increase in posted wages may lead to an increase in wages for regular workers at other firms. The internal pressure effect is mainly related to the literature on the relative income hypothesis, where an increase in posted wages raises the average wages of regular workers of firms that are actually posting the jobs.
V. Conclusion
The analysis of online job advertisement data in Japan reveals that the job-filling rate, which is the ratio of job postings matched to job applicants, has been declining in recent years. This suggests that firms may be facing greater difficulties in hiring workers than indicated by macro indicators such as jobs-to-applicants ratio.
The decline in the job-filling rate is in part driven by an increase in the skill requirements of firms, which is related to the observed acceleration in the accumulation of intangible assets, and has a complementary effect in raising demand for high skilled workers. Posted wages are clearly rising under tightening labor market conditions, driven by an increase in demand for well-skilled workers.
An increase in posted wages spills over to the average wages of regular workers with some time lag. The empirical results support the existence of (1) a channel in which firms raise wages in order to retain workers as it becomes easier for them to move to higher-paying jobs, and (2) a channel in which firms raise wages for fairness consideration as newly hired workers are paid high wages within a firm.
New insights into Japanese labor market through the use of microdata on job ads
The use of microdata on job ads in Japan provides new insights into the labor market that cannot be captured by official statistics. Specifically, the analysis reveals that the job-filling rate for regular workers has been declining, suggesting that firms may be facing greater difficulties in hiring workers than indicated by macro indicators such as jobs-to-applicants ratio.
The decline in the job-filling rate is in part driven by an increase in the skill requirements of firms, which is related to the observed acceleration in the accumulation of intangible assets. Additionally, the analysis shows that posted wages are rising under tightening labor market conditions, driven by an increase in demand for high skilled workers. Finally, an increase in posted wages spills over to the average wages of regular workers with some time lag, through both external and internal pressure effects.
Importance of analyzing spillover from posted wages to average wages of regular workers
Analyzing the spillover from posted wages to average wages of regular workers is important in the Japanese labor market because it provides insights into the wage determination mechanism and labor market conditions. The Japanese labor market is characterized by a dual structure of regular and non-regular workers, which has different wage determination mechanisms.
By analyzing the online job posting market for regular workers in Japan, using online job postings data, researchers can obtain highly granular information at the individual job level such as offered wages. This granularity can be used to analyze labor tightness and its drivers, as well as the impact of changes in labor tightness on posted wages.
The analysis also finds that an increase in posted wages has an effect to push up the average wages of regular workers with some time lag. Therefore, understanding the spillover mechanisms from posted wages to average wages of regular workers is essential for assessing the state of the Japanese economy and labor market.
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