The Study On The Impact Of Labor Cost Rising On The Industrial Technology Progress

Since the reform and opening-up, relying on the continuous input of low prices and abundant labor resources, China economy has made great and remarkable achievements. However, in recent years, China’s labor costs were rising fast caused by reducing labor population for lower birth rate and aging population. In the circumstances of the labor shortage, rapid rising wages and the enterprises moving to lower cost regions, China economy is facing the plight of "deindustrialization" and falling into a "middle-income trap".In the above-mentioned backgrounds, this thesis analyze the impact of labor cost rising on industrial enterprises behavior, and will Chinese industry enterprises facing rising costs pressures improve the productivity and technical level actively, and thus gave birth to the opportunity of transformation of industrial structure? Above all, this thesis analyze the effect of labor cost rising on the technology progress of enterprise behavior and the mechanism, and puts forward the model of innovation arbitrage mathematical, and the model of three area-two sector of the industry transfer and structure upgrading, based on the classical theory of neoclassical, new economic growth theory and Schumpeter’s "destructive creation" theory. Then, this paper makes empirical researches in three aspects:firstly, based on measuring and decomposing the total factor productivity (TFP) of above-scale industrial enterprises by the methods of DEA and Malmquist index, this paper makes an empirical analysis using provincial panel data in Chinese industrial department to study the effect of labor cost rising on the TFP and the mechanism. Secondly, in order to analysis the impact of labor cost rising on the enterprise’s R&D input and the output of innovation, this paper makes an empirical analysis using provincial panel data in industrial department from2000to2010. Thirdly, from the provincial and city respectively, based on the new economic geography theory, this paper had empirical tests to analyze the effects of rising labor costs and differences of labor costs on industrial structure by dynamic panel model. The main conclusions from the above theoretical and empirical analysis results are as following:(1) The rising labors costs had a stimulation role on the enterprise’s TFP, and it mainly came from the technical progress caused by the introduction of foreign technology and self-innovation, and the driving effect of self-innovation on technical progress was enhancing gradually. This shows that, in the export-oriented economy pattern and verticalization trend of international division, industrial enterprises increase intensity of the introduction of foreign mature technology and R&D input to integration into the global value chain, and to cope with the pressures of rising labor cost. However, the rising labors costs didn’t improve technical efficiency for the reasons that inadequate digestion and absorption of the introduction of foreign technology, overcapacity and weak market demand.(2) The rising labors costs had a stimulation role on the enterprise’s R&D input, and the output of innovation also increased, which indicates that the appropriate labor cost rising was helpful to get rid of the traditional model of economic growth relying on low-cost factors inputs. The profound analysis by different region shows that the innovation inputs and outputs of eastern enterprises are better than the central and western.(3) State-owned enterprises introduce technology mainly which can be effective for the output in the short term to avoid the pressure of costs rising, and ignore the self-innovation what need longer period to take effect. The main reasons were the political nature of state-owned enterprises and the failure of incentive mechanism of principal-agent, and the goal of short-term urge state-owned enterprises to introduce more technology for technical advancement. It is the result of a rational choice under the "political status", but this preference is a drag on the independent innovation. (4) From the empirical tests about the impact of wage growth on the upgrading of industrial structure from29provinces and37large and medium-sized city respectively, we can conclude that the differences in wage growth rate promoted structure of industry from low-end to high-end.This shows that, in the rapid wage growth conditions, on the one hand, the industrial capital flow to the high-end technology industries, and profits decline forced enterprises increase the intensity of R&D input and technology introduction. On the other hand, the capital flowed from the eastern region to the central and western regions, and the labor intensive industry and low-end technology industries transfer from eastern to the central and western regions which the labor cost was relatively low, the immigrated enterprises had relatively high technology for the central and western regions, all these promoted the overall upgrading of industry structure of the eastern and western regions.We can conclude from the main conclusions of this paper that the rising labor costs in China prompted enterprises to introduce technology, machinery and equipment, also to increase the intensity of the self-innovation, and the regional differences of wage also boosted the upgrading of industrial structure,China didn’t fall into the plight of "deindustrialization" and "middle-income trap", which indicates that the appropriate labor cost rising was helpful for the deep correction of industrial structure.