The Employment Effects Of The Minimum Wage System

Since China’s implementation of the minimum wage system from the beginning, there always exist controversies about the employment effects of the minimum wage system in academic circles. Supporters believe the minimum wage system has positive effects on employment, because they think the minimum wage system can guarantee workers’ basic living expenses and promote their employment intention, which can maintain the social fairness and stability. In addition, supporters think the minimum wage systemwillmake enterprises pay more attention to the technical efficiency in order to improve labor productivity and alleviate unemploymentpredicted by the traditional economic theory. On the other hand, the opposition believesthe minimum wage system cannot promote employment and will increase the labor costs of enterprises, resulting in more unemployment of low skilled workers and loss of social resource allocation efficiency. After summarizing the existing references, this paper also has its innovation. The paper focuses on Beijing, Shanghai, Guangdong and Taiwan, the four China’s best economically developed regions and in which the implementation of the minimum wage system has been more than 20 years. This paper will carry out a comparative studyon the employment effects of the minimum wage system in these four regionsboth in general and in industry and come to conclusion so as to provide suggestions especially for China’s best economically developed regions on how to make the minimum wage standard and improve the level and quality of employment.The study in this paper is divided into two aspects:theoretical and empirical analysis. In the theoretical study, this paper first analyzes the employment effects of the minimum wage system under the traditional supply and demand theory, trying to find out how the minimum wage will affect supply and demandof the labor market.Then, this paper analyzes the employment effects of the minimum wage system under the condition of perfect competition market and under the condition of the buyer’s monopoly market, which are two popular methods of analyzing this topic in current academic circles. In the empirical study, based on panel data model, this paper makes a comparative study on the employment effects of the minimum wage system in the four regions of Beijing, Shanghai, Guangdong and Taiwan. The conclusion is that a moderate increase in the minimum wage is helpful to solve the labor shortage in China’s developed areas and can improve the level of employment to some extent. But the extent of the impacts of the minimum wage on employment is different among the four regions because of the difference in the labor supply and demand situation among them. The empirical result is that the positiveeffect of minimum wage on employment of Shanghai is the largest, then Beijing and Guangdong and the effect of minimum wage on employment of Taiwan is a little negative. Besides, this paper also makes a comparative study on the employment effects of the minimum wage system of manufacturing and construction industries in the four regions. The two industries are highly related to the minimum wage. In the end, this paper makes a summary of the study and puts forward some relevant policy suggestions. For example, improving top level system design of the minimum wage, moderately increasing the minimum wage and broadening the channels of employment to create more employment opportunities and promote labor mobility, etc.