What Determines the Base Salary of Full-time/Part-time Workers?

We examine the determinants of the base salary of full-time/part-time employees in Japan. The factors that determine the base salary of full-time workers depend primarily on the size of the enterprise that employs the workers. Specifically, the base salary at large enterprises, especially in manufacturing sectors, is influenced by changes in prices, measured by the past inflation rate, via the negotiation process of base pay increase between unions and firms. As for small enterprises, both labor market tightness and margin price (defined as the difference between output and input prices) impact the base salary. On the other hand, the base salary (hourly scheduled cash earnings) of part-time workers is mainly determined by labor market tightness, while it is also affected by minimum wage increases.