Labor Protection, Executives-employee Compensation Gap And Production Efficiency

With the increasing marketization degree in our country, the fairness of income distributions has been an urgent important issue in the national economy. The compensation gap between urban and rural area, and in different regions continued to expand, breeding a series of social issues, contributed to social instability and effected the harmonious of society. The executives-employee compensation gap is a microcosm of the problems. In the socio-economic development, social fairness is always one of the government functions’ social objective, it must be taken into account. Government as a complementary and alternative function to market must take its action. The labor contract law is a tendentious piece of legislation provides protection for vulnerable workers. Thus, companies will pay more attention to coordination and improve labor relations. Therefore the law tries make the executives-employee compensation gap of inequality be alleviated to some extent.In addition, the executives-employee compensation gap is an incentive contract of the company that also involved executives and employees. It can help improve enterprise efficiency through competition, but it also may decrease in efficiency of production because of the unfairness of compensation gap. If the executives-employee compensation gap widen even more incentive to the executives, executives can feel the importance of self, unleash their enthusiasm, thereby creating a positive incentive effects, then for an employee, executives-employee compensation gap just only harm the profit of employee. But the labor contract law has stepped up its protection for workers, the compensation fairness would be created to motivate employees and improve productivity.Firstly, this paper started to analyze the macro-background of the promulgation of the labor contract law, and reviewed the aspects of literature in labor protection, executive-employee compensation gap and productivity efficiency around the world. After the literature review and theoretical analysis, then propose to hypothesis. In the empirical part, the paper analyzed the Shanghai and Shenzhen a-shares of listed manufacturing companies related data from 2005 to 2013, descriptive statistics, correlation and linear regression. The study showed that: executives-employee compensation gap is too large, resulting in lower average employee compensation satisfaction, dampened the enthusiasm of ordinary employees, and reduced efficiency. Therefore, the executives-employee compensation gap for the average employee did not have positive incentive effects, that means it has blocking effects to productivity efficiency. After the promulgation of the labor contract law, the level of labour protection in the enterprise increased, and it has dramatically reduced the compensation gap between executives and employees, and the labor contract law undermine the executives-employee compensation gap obstacle to productivity effects. That means the implementation of the labor contract law to curb executives-employee compensation gap continued to expand led to lower labor productivity issues, thereby increasing productivity.Finally, on the basis of empirical research, this paper proposed recommendations and limitations of this study.