Effects Of Minimum Wages Under The Dual Economic Structure

Since 1994, the policy of minimum wage was implemented in China, and local governments have also enacted minimum wage standards and dynamically adjusted, but the effects of minimum wage are not clear, affected the related policy-making more scientific. China is a developing country, there is greater pressure on employment, and how to avoid negative impact on employment of the minimum wage policy becomes one of the major problems in the process of economic development. The thesis empirical studies on the employment effects of minimum wages, and explains the empirical results from the theoretical point of view.This thesis regards, the characteristics of the dual economic structure in China includes:the deepening trends of urban-rural dual structure, the widening gap of regional economic development, the rural surplus labor, urbanization lags behind industrialization. This determines the characteristics of the labor market in China:in the process of a large number of rural surplus labor force transfering to urban and non-agricultural industries, most of these transfers have not completely left the land to work in industry, whose reservation wages are lower,and whose levels of consumption and expected future life is different from the labors in urban areas.They will depress the wage levels in urban labor market, and force the labors with higher reservation wages withdraw from the regional labor market, affecting the labour-force participation rates of the cities. In view of the dual economic structure and labor market characteristics, the research framework on the employment effects of minimum wages needs the minimum wage factor to be introduced into the Lewis's Dual Economic Model. The research framework shows that the employment effects of minimum wages in the urban labor market depends on the relationship among the minimum wage levels and transfer's reservation wages, initial equilibrium wage levels in city labor markets(without labour flow). The employment effects are the interaction results of the effects on labor demand and supply. From the view of labor demand, the ultimate demand effects are the interaction results of impact of micro and macro, which will cause an increase or decrease employment. From the view of labor supply, the minimum wage standards will affect the behavior of the individual's labor supply; the minimum wage standards increase (or decrease) will cause the increase in labor supply of low-income groups (or decrease).In view of the imbalance of regional economic development in China, this thesis empirical studies on the impacts of the minimum wage standards on the labor markets in eastern, central and western regions of China. In the basis of summing up the characteristics of the minimum wage systems and employment of urban labor markets, the econometric analysis of panel data model shows that the employment effects of the minimum wages are uncertain; the impact of minimum wages is positive in some areas, and negative in another areas. Compared with the employment impacts of output and the minimum wages, the employment impact of wage in the eastern areas is greater than which in the central and western areas, the employment impact of output in the central and western areas is greater than which in the eastern areas.For regional differences, this thesis analyzes the factors from the views of affecting labor supply and demand. From the supply perspective, there is close relationship among the minimum wage system and the urban minimum living security system, the family burden. The difference between the minimum living standard and the minimum wage directly affects re-employment behaviors of the groups with low-skills; proper arrangement is conducive to their employment. Gradually reducing family burden will help alleviate the pressure of employment in the labor markets. From the demand perspective, the industrial structure and technological progress have a direct impact on employment. Analysis showed that the proportion of secondary and tertiary industries, capability of absorbing labor force in the eastern areas are higher than which in the central and the western areas, the employment impact of the minimum wages in the eastern areas are greater than which in the central and the western areas. Technological progress in the eastern areas is higher than which in the central and the western areas, with the minimum wage rising, machines will replace the work of many unskilled workers. Therefore, negative impacts of the minimum wages in the eastern areas will be greater than which in the central and the western areas under technological progress.Comprehensive the findings of theoretical and empirical analysis, referring to foreign minimum wage systems, this thesis presents proposals:From the overall strategy of the national economic structure, different minimum wage policies will be implemented in different areas; With combination of many factors, the appropriate minimum wage standards will be set; The system of minimum wages and the unemployment insurance system, minimum living standard security system must be made to dovetail with each other; Dynamic adjustment of the minimum wage standards should be established; Collective consultation should be setup; The coverage of the minimum wage system should be adjusted, to avoid the negative impact on employment; Support development of the middle & small scale enterprises, expanding the demand for labor; Improve the quality of workers to reduce structural unemployment; Strengthen information network construction, to maintain fair competition in labor markets.