The Migrant Workers’ Employment Effect And Economic Effect Of Raising The Minimum Wage In Hunan Province

Minimum wage system is an important policy tool that betters the income of thepoor, maintains the basic rights of workers and improves the social incomedistribution. Since the system was established, the scholars debate hotly on theminimum wage system and the minimum wage standards. With the repeating“shortage of migrant workers" and the propelling of income distribution reforms, theminimum wage all over the country was raised, but its effects produced in variousplaces there is different. What is impact of the minimum wage standards on migrantworkers in Hunan Province? What impact has minimum wage system brought toeconomy and society? What is the extent of it? These studies have not only thetheoretical significance of improving the minimum wage system, but the greatpractical significance of accelerating the transfer of agricultural surplus labor,balancing the pattern of income distribution, realizing the optimal allocation ofresources and developing the objectives of the Two-oriented Society.Based on the above background, this paper firstly makes a quantitative analysisfrom the implementation of the minimum wage, the transfer number, scale, potentialand direction of rural surplus labor according to the actual Hunan Province.Theresults show that the minimum wage system in Hunan Province has not been fully andeffectively implemented in some sectors.From the current situation of AgriculturalSurplus Labor Transfer in Hunan, there has great potential of agricultural surpluslabor.While the transfer purpose industries of labor force will still remainconcentrated in manufacturing, services and other industries, but the destination willbe transferred from the mainly out-province to the in-province.Then, on the base of explaining impact mechanism of the minimum wagestandard on the employment effect of migrant workers, this paper measures the impactof minimum wage on the transfer employment of migrant workers and the economiceffect of minimum wage standard through embeding labor demand modules incomputable general equilibrium model in the Hunan Province and describing patternsof labor market segmentation. The economic effect shows that the increase of theminimum wage in the short term will make a slight increase to the wages of migrantworkers, but a lot of decline in the long term. This is because, in the short term, thedemand of the sector workforce covered by the minimum wage decrease, without taking into consideration of technological progress and structural adjustment case, theenterprise will employ migrant workers of the non-covered sector, and the short-termemployment of migrant workers will be increased. But in the long term, because ofthe substantially reduction of the demand workforce covered by the minimum wage,and to reache the full employment of economy, companies will choose the migrantworkers who accept less than the minimum wage level. And only when wages ofmigrant workers dropped enough, enterprises hire more migrant workers and urbanemployment of migrant workers alternative employment, the full employment levelcan be achieved. Second, in the short term, though the increased minimum wage willbring about unemployment increase and GDP decrease, but it is not as terrible as mostof scholars imagined in fact the effect. In the long run, the decline in capital stockwill absorb some of the unemployed migrant workers, and reduction in GDP is notalso so much. The model’s results also show that the minimum wage has a greaterimpact on the manufacturing sector in Hunan Province. On the whole, increase of theminimum wage is more conducive to the current industrial structure adjustment, theindustrial restructuring and upgrading and the labor force employment.Finally, based on the conclusions of this paper, several policy recommendationson the development of minimum wage standard in Hunan Province and the transfer ofmigrant workers have been offered.