This chapter examines the relationships between promotion, effort incentive, and wages for white-collar workers in several large Japanese firms. The following results were obtained. First, employee position on the hierarchical ladder is crucial to understanding the relationship between promotion, effort incentive, and wages. The effect of wages on effort is important for employees early in their careers or before being promoted. The higher the wage payment, the higher the effort from these employees. For employees in mid-career, the crucial variable that increases effort is promotion...

This chapter examines the relationships between promotion, effort incentive, and wages for white-collar workers in several large Japanese firms. The following results were obtained. First, employee position on the hierarchical ladder is crucial to understanding the relationship between promotion, effort incentive, and wages. The effect of wages on effort is important for employees early in their careers or before being promoted. The higher the wage payment, the higher the effort from these employees. For employees in mid-career, the crucial variable that increases effort is promotion prospective as measured by, for example, better performance in business. Next, effort can be increased only for employees who are early in their careers, or are lower on the hierarchical ladder. Age and job tenure are also effective for determining both promotion possibility and wages. Finally, what determines promotion, or how employees are promoted, differs according to the position. In other words, the decision-making variables are different for promotion to department head versus promotion to director.