Non-Regular Employment as a Mixed Institutional Error: Employment Adjustment and Wage Suppression in Japan

This paper develops a new theoretical framework to explain why Japan’s non-regular employment system produces persistent wage gaps, labor shortages, and structural disequilibrium. While non-regular employment in Japan is officially justified as a mechanism for employment adjustment, the institutional category has come to serve a second, implicit function: wage suppression. The paper argues that this conflation constitutes a mixed institutional error—a structural design flaw in which two distinct institutional purposes are merged without explicit recognition. To clarify this mechanism, the study introduces the R–B–K model, a three-dimensional framework that evaluates labor market coherence through the alignment of Responsibility (R), non-wage Benefits (B), and employment Risk (K). The model formalizes a basic monotonicity condition: higher responsibility, higher benefits, or higher employment risk must not reduce total compensation. Violation of this condition indicates institutional inconsistency. Applying this framework, the paper shows that Japan’s non-regular employment regime systematically violates this condition. Non-regular workers often perform tasks with comparable responsibility to regular workers, yet receive lower benefits and bear significantly higher employment risk, without corresponding compensation. This structural misalignment explains Japan’s chronic labor shortages, low productivity, and the institutionalized misclassification of non-regular workers as “low-skilled.” A comparative analysis with the Nordic countries, Germany, and the Netherlands demonstrates that these systems maintain a clear institutional separation between employment adjustment (managed through contract duration and dismissal rules) and wage determination (based on occupation, task content, and responsibility). Japan’s failure to maintain this separation is identified as the core source of disequilibrium. The paper concludes that Japan must redesign its labor market institutions by disentangling the functions of employment adjustment and wage determination, and by ensuring that compensation reflects responsibility, benefits, and risk in a coherent manner. The R–B–K model provides a generalizable analytical tool for evaluating institutional coherence across labor markets and other policy domains.