The Japanese wage system: a study of postwar economic development

Alter World War II, the Japanese economy experienced a period of marked industrial expansion. The average economic growth rate since the war is 10 percent a year. Japan now has the world's third largest Gross National Product though its per capita income is still around twentieth. This rise is mainly due to the increased productivity in individual industries as a result of a favorable supply of labor and the introduction of advanced foreign technology. The movement of the labor force from low to high productivity was accomplished during the period of great economic expansion. The introduction of technology and innovation in the industrial sector, especially in large firms, was quite fruitful though it required a large amount of capital. In Japan, the successful accumulation of internal capital has been a major reason for the rapid economic growth. The rate of capital formation and savings has been very high since the launching of Japanese capitalism in the 1880's. The high rate of saving is remarkable considering the low level of per capita income. Why capital accumulation occurred in spite of the low standard of living is an interesting phenomenon. In addition to the foreign capital invested in Japan, the characteristics of the Japanese social and economic structure should be counted as factors of forced savings for financing industrialization. Thrift and austerity are considered virtues in the Japanese society. Additionally, the economic structure greatly contributed to the development. It is my hypothesis that the Japanese wage structure has contributed to economic growth. Wages were kept low in Japan over a long period of time, making large profits and savings possible. The hypothesis is that the Japanese wage system played a positive role in Japanese economic development by contributing to the accumulation of capital, but that today's social and economic situation will not permit the survival of the low-wage system. Research into wages and industrial development is significant since the success of a country's industrial growth depends partly on the level, structure and rates of increase of wages.