The Study On The Employment Impacts Of The Minimum Wage And Its Mechanism In China

Since the implementation of the minimum wage system，it has been givenhigh expectations, but there are many scholars worry that the minimum wage willdiscourage employment. However, many scholars at home and abroad havecontroversies on the effects of the minimum wage on the employment. Because ofthis, we use the weighted cross-section area fixed effects methods and build theemployment-minimum wage model to study the effects of the minimum wage onemployment in China from a comprehensive perspective, and we have thefollowing conclusions:From a national perspective, the minimum wage will promote employment inthe long run. The first reason is that as the minimum wage was raised, thecompany will take various means to offset the rising labor costs; secondly, withthe minimum wage increase, there will be more job seekers searching for work,thus it will increase the employment.Regionally, the promoting effect of the minimum wage on the employment inthe eastern region is larger than the western region, but the effect in the centralregion was not significant. The first reason is that the minimum wage level in theeastern region is higher and attract more inflows of labor; the second reason is thatthe labors of the provinces in the central region have mutually transferred to offsetthe impact of the minimum wage on the employment; thirdly, the minimum wagelevel in the western region is low, moderate increase will reduce labor flowing outnext year, and increase local employment.From the perspective of industries, the minimum wage enhancement makethe farm income of the rural labor force relatively low, thus contributing to thelabor force flowing from primary industry to secondary and tertiary industries.From the perspective of sub-industry categories, as the construction industry islabor-intensive industries, and is gathered a lot of migrant workers, when theminimum wage is strictly enforced, the construction enterprises. will reduce thenumber of employment In the industry and wholesale and retail food industry, theimplementation of the minimum wage system is rather poor, in the long term itwill promote employment.From the perspective of ownership, the promoting effect of minimum wage on the employment is larger in the other ownership enterprises than thestate-owned enterprises in the long-term, but the promoting effect in privateenterprises and individual units is not significantly. The first reason is that eventhe raising minimum wage will lead to increased labor supply so as to promoteemployment, but because there are barriers to entry of state-owned enterprises,this effect will be less than other ownership enterprises; the second reason is thatthe enforcement of the minimum wage in the private sector and individual units ispoor and the effect is not obvious.From the perspective of education level, the minimum wages reduce theproportion of workers with lower education levels and increase the proportion ofworkers with higher education levels. That is, when the minimum wage increases,the firm will choose the person with high skill levels instead of low skill levels.We further analyze the way the minimum wage affecting employment withthe construction industry as example. The results showed that the minimum wageaffects employment mainly through three channels, which are changes of laborproductivity, power equipment and the ratio of skilled workers. The way theminimum wage affecting employment in state-owned construction companies issingle, as the non-state-owned enterprises are more diversified. It’s mainlybecause some state-owned enterprises’ reform is not complete, and the response tothe increasing minimum wage is less flexible than non-state-owned enterprises.Finally, based on the previous analysis, we propose a number of policyrecommendations about how to improve the minimum wage system in China inthis paper, including further increase in the minimum wage, especially in easternregion; and further strengthening the regulation and enforcement of the minimumwages; strengthening the publicity work of minimum wage to raise awareness ofworkers’ rights; the setting of the minimum wage standards should be moredetailed.