An Analysis Of Effects Of Minimum Wage Increase On Wage Distribution

With the continuous development of China's economy,the level of wage keeps growing,while,the wage gap is widening.In order to provide minimum living allowance for low-income workers,reduce the wage gap and promote social equity,China introduced the minimum wage in 1995,but the argument about the impact of minimum wage on the wage distribution never stopped.By using microeconometric methods,this paper analyze the effects of minimum wages increase on the distribution of wage in China.This paper introduce the Neumark contemporaneous effects model and lagged effects model and modify the models based on wage features of China.By analysing data from China Health and Nutrition Survey,this paper get the result of the effects of minimum wages increase on the distribution of wage in China.The results of empirical analysis indicate that:there are significant contemporaneous effects of minimum wage on low wage intervals,but the effects are small.After 2004,the first year of implementation of ‘Minimum Wage Regulations',there are significant spillover effects,but the ranges of spillovers are small,the effects can only reach to 1.50 and 1.25 times of minimum wages on male and female wage distribution respectively;spillover effects on both male and female tend to decrease with the increase of relative wage interval.Not surprisingly,the evidence indicates that low-wage workers are most strongly affected,while higher-wage workers are little affected.The results presented also indicate that there are lagged effects after an increase of minimum wage,different with contemporaneous effects,workers who affected by the lagged effects are almost higher-wage workers.Using 10:50 ratio and 10:90 ratio as measurements of wage equality,this paper analyzes the wage equality changes,but,there is no evidence of increase of minimum wage effects on the wage equality.Based on the empirical results,the conclusion of this paper is that the aim of minimum wage should not to narrow the income gap,promote social equity or economic development,but to provide workers with minimum living allowance,support their families and maintain their dignity.