Minimum Wage Effects On Income Distribution In China’s Industrial Enterprises

Minimum wage system in China as one of social security policies to protect low-income groups has been implementing for twenty years. This paper aims to analyze the minimum wage system’s influence to Chinese industrial companies, to explore the influence between Minimum wage system and the distribution of national income and to analyze the underlying reasons, in order to systematically assess the effects of minimum wage system to the distribution of income.On the basis of predecessors’ research, this paper builds the theory model of the minimum wage affect income distribution, and concludes four effects for minimum wage system: compensation effect, spillover effect, substitution effect and elimination effect. The compensation and spillover effect will have a positive impact on labor income share, alternative and eliminating effect will have a negative impact. The net effect depends on the size of the four effects. Then by the comprehensive analysis of the industrial department’s panel data at the provincial level, paper studies the minimum wage system to the enterprise actual influence of income distribution. First, from entire industry, the improvement of the minimum wage will reduce labor income share, but the impact effect is small. At the meantime, through the model, analyze effective path for minimum wage system. We found minimum wage will have negative impact on employment, at the same time, through labor productivity rate or technology and equipment rate to influence labor income share. Second, under the framework of industrial sector, divide two parts—labor-intensive and capital-intensive. According to cross compare, found minimum wage system has more negative impact on labor-intensive than capital-intensive, but the capital-intensive more likely to occur the phenomenon that capital instead of labor. Therefore, this paper argues that the minimum wage system on the net effect of income distribution is negative effects, which will deteriorate the labor income distribution pattern, make the income distribution to the capital. Based on theoretical research and empirical analysis, this paper puts forward to three aspects: perfect the calculation of minimum wage standard and management, the implementation of the minimum wage system combining with the industry and perfect the policy recommendations of supporting measures, etc.The research conclusion will help to have a better understanding for minimum wage income distribution effects in our country and help government to improve the income distribution policy and minimum wage system.