Transformation of Labor Market and Legitimacy of Income Inequality in Japan

Many advanced countries have witnessed a growth of economic inequality in the age of economic globalization. However, economic inequality is not always regarded unfair. Historical and institutional contexts in each country frame citizens’ perceptions about to what extent and among which social groups economic inequality is regarded as legitimate. If citizens consider it legitimate, such economic inequality is likely to be reproduced. Therefore, transformation of labor market caused by economic globalization has grown inequality between different social groups to different extent according to how each country has legitimated economic inequality historically and institutionally.

The present research focuses on a Japanese case and investigates what inequality Japanese people regard as fair and how it relates to Japanese historical and institutional contexts. Japanese welfare-employment regime has supported citizen’s life differently according to one’s industry, firm size, and gender. We examine how this condition relates to Japanese perceptions about fair income gap by analyzing what determines “what amount of income people think that they should earn.” To be more specific we investigate whether actual income gaps between social groups such as gender, those with different educational levels, occupations and employment status, are reflected by Japanese perceptions of ‘just income gap’ between these groups. As a result, we find that gaps of perceived appropriate income between different employment statuses and between different firm sizes are larger than actual income gap between these groups. Furthermore, employment status and firm size play more, or at least equally, important roles than occupation. It shows that Japanese people assume disproportional distribution of income according to firm sizes and employment status is more legitimate than one according to human capital.