Impact Of Rising Labor Costs On The Enterprises TFP

The Since the reform and opening up,China has realized the miracle of economic growth by making use of the efficiency of labor force allocation brought by reforms.However,with the gradual disappearance of the labor bonus,the decision-making behavior and factor structure of the company are facing tremendous pressure and severe challenges.The theory of endogenous growth shows that full-factor growth under the path of steady-state economic growth is an important source of long-term economic growth.Therefore,China's manufacturing enterprises urgently need to change from a growth model that relies on inputs such as capital,land,and labor to a growth model that relies on innovation,quality,technology,and other factors.Current research results indicate that rising labor costs will force companies to increase their productivity.Although the increase in labor costs will increase the cost of production and reduce the profits of enterprises,it will also encourage companies to take measures to increase productivity and offset costs.However,due to the difficulty in obtaining data from one-handed micro-enterprise surveys,research on the effect of rising labor costs on total factor productivity and its role in research is rare.Therefore,the issue studied in this paper is the impact of rising labor costs on the total factor productivity of companies,and what path companies will choose to increase their total factor productivity in the face of rising labor costs,and explore the impact and causes.On the basis of systematically reviewing the existing researches,this paper uses the "China Employer-Employee Survey"(CEES)to conduct a robust empirical analysis of the effects and mechanisms of the changes in China's labor factor prices on total factor productivity growth.The benchmark regression shows that the increase in labor costs has a significant promoting effect on the growth of total factor productivity.Under the premise of fully introducing control variables such as the type,size,industry,region,and employee characteristics of an enterprise,the estimated coefficient of influence is 0.203%.The test of propensity score matching method found that high labor cost has a higher effect on the promotion of total factor productivity of enterprises than that of low labor costs.Finally,the instrumental variable method is used to prove that the two have a more robust causal relationship.On this basis,this paper further analyzes the mechanism of the change in labor factor prices on the growth of total factor productivity.Through regression analysis of the intermediary variable method,it is found that the rising labor cost has formed a more significant "forced" effect on the improvement of the total factor productivity of enterprises.The increase in labor cost affects the total factor productivity of enterprises through three paths of years of education,machine substitution,and ERP system.The boosted transmission effects reached 0.028%,0.016%,and 0.073%.Of the direct effect.Therefore,in order to cope with the rapid increase in labor costs,companies tend to be more proactive in choosing higher-quality human capital and improve the level of information technology.This is an important path for companies to cope with rising labor costs and achieve total factor productivity growth.Therefore,this study finds that in order to cope with the pressure of rapid increase in labor costs,Chinese enterprises should actively transform and upgrade.The profit model should accelerate from being driven by relying on the labor dividend to relying on the dividend of human capital,and from relying on factor inputs to relying on full factor drivers.Based on the above research findings,this paper provides some policy recommendations on how companies can increase total factor productivity when facing the pressure of increasing labor costs.