KJCKorea
Journal Central

This paper purports to reveal the factors associated with wage inequality in Korea and Japan by using two micro panel data sets on households from 2014 to 2018, before COVID-19: Korea Labor & Income Panel Study (KLIPS) and Keio/Japan Household Panel Survey (KHPS/JHPS), respectively. This study employs an unconditional quantile regression (UQR) method to have robust estimation in measuring the wage inequality, as well as a recentered influence function (RIF)_Oaxaca decomposition method. The empirical results show that first, age, education, gender wage gap, dual structures of conglomerates vs. SMEs and regular vs. non-regular workers are the common sources of wage inequality in two countries. Second, in Japan, union members neither receive higher pay than non-union members nor have a smaller wage gap compared to their counterparts. However, they do in the middle and upper tails in Korea. Furthermore, an interesting finding lies in the relationship between unemployment and wages, which is that a higher unemployment rate contributes to a wage gap in Korea, while it does not have the same effect in Japan. Finally, the decomposition analysis suggests that the wage inequality is not sufficiently explained by the explanatory variables in each quantile of the two countries. Thus, this paper suggests that policy implication for resolving wage inequality should be associated with country-specific factors, including different institutions, industries, and social behaviors when establishing labor market-related policies.