Internal Promotion and Wage Structure within Firm--Analysis by Micro-Data--

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A remarkable feature of internal promotion in Japan is saidto lie in the fact that in choosing candidates for higher managerial positions Japanese firms attach importance to whether or not the candidates join the companies fresh from school, that is whether they are so called "Haenuki"or not. The aim of my research is to ascertain the existence and the extent of this promotion practice and also to investigate how much wages increase when employees are promoted to higher positions. The data used in this research are the micro-data from Labor Ministry's Basic Statistical Survey on Wage Structure.Main findings for internal promotion system are as follows. (1) Haenuki is promoted to higher positions faster than non-Haenuki. (2) Aging and slower rate of growth of the Japanese economy after the first oil crisis have decreased promotion speed much more for Haenuki than for non-Haenuki. (3) Unfavorable effects of work experience at other firms on promotion speed have also weakened after the first oil crisis. The facts (2) and (3) could be interpreted as a sign of declining lifetime employment system.Regression analysis of internal wage structure clarifies following facts. (1) The regression model including tenure and age as major independent variables yields higher coefficient of determination than that which takes tenure and external experience into account. (2) Age factor plays an important role in Japanese wage structure. (3) The higher the managerial position, the larger the effect of age on wages. The second fact seems to suggest that the cost-of-living compensation hypothesis is still prevalent in the Japanese economy.