Changes in the Reservation Wage During the COVID-19 Pandemic in Japan

This study examines changes in reservation wages during the pandemic using data on desired wages among job seekers in Japan. The effects of occupational characteristics, municipal fear of infection risk, local labor market tightness and financial support on the changes in the reservation wages for part-time and full-time jobs are examined. First, we find that at the beginning of the pandemic, reservation wages for part-time jobs decrease and those for full-time jobs increase; subsequently, the movement of the reservation wages reverses directions. Second, reservation wages for full-time jobs for which working from home is highly feasible decrease after the beginning of the pandemic. However, a similar change is not observed in reservation wages for part-time jobs. The quality of work-life balance and the stability of employment do not have clear effects on reservation wages. Finally, geographic differences are examined. In areas where the epidemic spread, reservation wages increase, especially for part-time jobs. Regarding labor market tightness, when finding a job becomes easier, reservation wages increase. Municipal financial capability positively affects reservation wages when a state of emergency is declared or just before such a declaration. The municipal-level feasibility of working from home, which is determined by the occupational composition of job seekers’ applications, decreases reservation wages for full-time jobs as well