Abstract

Wage structures and the distribution of earned income in Japan and the U.S. and their relation to the broader institutional structure of each country's employment system are the main focus of this chapter. In discussing pay systems in the two countries, six stylized facts that characterize economic outcomes in each country are first outlined. This chapter argues that these stylized facts are enduring, are not in contradiction with one another, and result from the historically contingent and specific institutions of each country rather than from general economic tendencies that apply to all advanced economies. This chapter discusses first the institutions in each country that govern the relation between pay, experience, and skills. Then, the career paths in each country are analyzed using company-level, industry-level, and national data sets. Lastly, the relation between inequality and growth is discussed, and the evidence on intercountry inequality differences are reviewed.