Abstract
This study explored minimum wage determinants using prefecture level panel data of Japan for 2003–2016. Results of a fixed-effects model are summarized as explained below.
First, the minimum wages of urban and rural prefectures were affected by changes in minimum wages of neighboring prefectures in the prior year. The marked effect of neighboring prefectures reflects the functioning council system, comprising various stakeholders, which responds to political adjustment mechanisms. Second, the minimum wage is not linked strongly to regional economic indicators such as household expenditures. It deviates from regional economic conditions in some ages. Third, effects of the degree of public assistance for each protected person were not sufficiently significant even after enforcing the Minimum Wage Law in 2008, which was designed to ensure a “minimum healthy and cultured life” to avoid a reversal phenomenon between public assistance levels and minimum wages.
