Workplace Share of Nonstandard Employees and Compensation Inequality in Organizations

Abstract

The main aim of this paper is to determine how the workplace share of nonstandard employees affects compensation inequality among the whole workforce. It has been found that nonstandard employment will affect the individual’s subsequent career. But it remains unexplained how the share of nonstandard employees as an organization characteristic affects the compensation level of all workers in the same workplace, including standard employees.

This paper addresses the issue by analyzing the “Survey on Diversified Types of Employment” conducted by the Japan Institute for Labor Policy and Training (JILPT) in 2010. The income and the company-based fringe benefits, which are considered to be important in the composition of Japanese management, were used in that analysis as the representation of compensation. The results indicate that working in establishments with a higher proportion of nonstandard employees tends to lead to a lower level of income and fewer fringe benefits. The proportion of nonstandard employees in an establishment does not necessarily bring a higher compensation level to nonstandard employees. That result contradicts the proposition we have made in this paper.

Also, the compensation inequality between standard and nonstandard employees is conditioned by the proportion of nonstandard employees in the establishments. The compensation inequality will be minor where there is a high proportion of nonstandard employees.

The results of this article suggest that compensation inequality may be eliminated between standard and nonstandard employees, but the compensation level of both sides may be lower than in establishments which have higher compensation inequality.