Empirical Research On Labor Cost Stickiness Of Manufacturing Enterprises

The cost stickiness means there is non-linear relationship between the changes of cost and volume of business. This is to say, the change of cost while volume of business reducing is smaller than while increasing. That is different from cost behavior theory in traditional management accounting, which assumes that there is inevitable linear relationship between the changes of cost and volume of business. So, research on the cost stickiness is a continuation and development of the cost behavior theory. The labor cost is the important constituent of enterprise cost, research on the labor cost stickiness is further expansion research to the cost stickiness coherency. Labor Contract Law requires companies and employees must sign labor contracts, relaxes the conditions to sign without fixed term labor contract and increases firing costs and illegal costs of employers. Through the establishment of a number of provisions to protect the general worker’s legitimate rights and interests in a greater degree and make hiring more specifications. Thereby the labor adjustment cost is increasing. The promulgation of the Labor Contract Law offers us an opportunity to study labor cost stickiness behavior.In this article, the promulgation of the Labor Contract Law offers us an opportunity to study labor cost stickiness behavior of China A-share manufacture listed companies during the period 2003-2013. Through empirical study, we find those results. Firstly, there is labor cost stickiness behavior in Chinese manufacture listed companies. Secondly, level of fixed assets per capita impact on degree of labor cost stickiness. Relative to labor-intensive enterprises with lower level of the fixed assets per capita, there is higher degree of labor cost stickiness in the capital-intensive companies with higher levels of fixed assets per capita. Thirdly, the Labor Contract Law impact on degree of labor cost stickiness. This is to say, after the Labor Contract Law was promulgated, there is an increase of labor cost stickiness in all companies, especially obvious as those labor-intensive enterprises with lower level of the fixed assets per capita. Fourthly,after the Labor Contract Law was promulgated, there is an increase of labor cost stickiness in all companies. This leads to labor-intensive enterprises in lower level of fixed assets per capita reducing staff size(or significantly reduce its rate of expansion), while the capital-intensive companies with higher levels of fixed assets per capita to expand the size of its staff.What’s more, we verify that the Labor Contract Law affects different companies at different degrees. In labor-intensive enterprises in lower level of fixed assets per capita, there is an increase by a wide margin of labor cost stickiness, which leading companies tend to reduce the scale of their employees. While in the capital-intensive companies with higher levels of fixed assets per capita there is a small increase of labor cost stickiness, which promoting the expansion of their employees. To some extent, these also show that the labor contract law has also played a role in terms of promoting the upgrade of China’s manufacturing industry, which promotes the shift from labor-intensive to capital-intensive manufacturing enterprises in China.