The Incidence Of Employer's Social Security Contributions On Wages And Employment

The theory of payroll tax incidence predicts that the labor costs caused by social security contributions may reduce the firm average wages and employment.Because of the heavier and heavier burden of social security contributions with the increasing wages,the crowding-out effect has been noticed,though,academic research is not yet abundant and the judgments are inconsistent.Thus,it's of great importance for the management of the labor market to pay attention to the incidence of employer's social security contributions on wages and employment.Sorting out relevant theoretical and empirical literature at home and abroad,our study uses the heterogeneity of the actual rates of social security contribution in different enterprises in China as the identification basis for research.And based on the partial equilibrium analysis theory of payroll tax,using the company 's wage survey data of Hangzhou in 2013,the main contents and judgments are as follow:Firstly,the social security contributions paid by employers have a negative effect on the wages and employment.And the standardization coefficient shows that the wage effect is stronger than the employment effect.With a 1%increase on real rates of social security contributions,the wage will be significantly reduced by 0.025 percentage,and the scale of employment comes to be reduced by 0.044%significantly.Secondly,the employment effect from social security contributions is much stronger than wage effect in the private enterprises and those with low structure of employee's academic qualifications.The reason is probably that these kinds of companies are more like labor intensive enterprise whose margin is low.And affected by the minimum wages,there lies limited room for employees' wage to be able to absorb the costs.Thirdly,the signing rate of open-ended labor contracts is used as the basis for dividing the human capital structure of enterprises.And it shows that the low scale companies of human capital structure have both heavier wage effect and employment effect than those with high scale.And for these reasons,it's important for the government to take these proposals into consideration,that is,deduction of fees and taxes,priority policies to low-human-capital-structure enterprises and improving the supervision of the labor market.Compared with the other similar research,this article has made new progress in three aspects.The first one is mainly about the research content.It is the first time for the empirical research focus on the incidence of social security contributions simultaneously affecting wages and employment.What's more,the employer-employee salary matching data has supplemented the current problems in the academic world due to data limitations.The employee's education structure,the employee's open-ended labor contracts signing rate,and labor union variables are all controlled,and the micro data on social security contributions paid by employers which have to be paid with five kinds of social security together is also used here.Last but not least,the systemic estimation methods of 3SLS and standardized estimations are used in the research which solves the interaction effect between the wage effect and employment effect as well as the issue that these two effects can't be compared due to their different dimensions.