An Empirical Study On The Impact Of Minimum Wage Standard On Firm’s Profit Margin

Since the implementation of the minimum wage system in China,the minimum wage standard has gradually increased,the basic wages of workers have been guaranteed by the system,and the wages of low-income groups have increased significantly.However,higher wages for workers mean higher labor costs for enterprises,which will lead to the compression of firm’s profit margins.China is in the process of industrialization,and industrial enterprises have created huge dividends for China’s economic development.Whether the operation and development of industrial enterprises will be affected by the minimum wage standard is an important topic of great concern to governments at all levels,enterprises and academic circles.This paper firstly defines the related concepts,and reviews the research status at home and abroad.Secondly,based on the data of the minimum wage standards of all provinces and cities,this paper makes a descriptive statistical analysis of the current situation of the minimum wage standards of all provinces and cities in China from the macro overall and regional level;Based on the micro data of China’s industrial enterprises,this paper makes a descriptive statistical analysis of the current situation of industrial firms’ profit margin;Thirdly,based on the database of Chinese industrial enterprises from 2004 to 2013 and the minimum wage standard of 277 prefecture-level cities,this paper adopts fixed effect model,difference-in-difference model,2SLS,mediating effect model and other empirical studies to study the impact and mechanism of minimum wage standard on firms’ profit margin;Finally,from the perspective of ownership,region,industry and sub industry,the heterogeneity of the impact of the minimum wage standard on the firms’ profit margin is examined.This study draws the following conclusions:Firstly,China’s minimum wage standard is rising year by year.There are differences in the minimum wage standards among different regions and cities.The eastern region has always been in the leading position in the country.Meanwhile,the profit margin of industrial enterprises in China is rising slowly.The profit margin of enterprises in different regions and industries is also different.For example,the profit margin of enterprises in the western region is the lowest,and the profit margin of mining industry is significantly higher than that of manufacturing industry.Secondly,the minimum wage standard has a restraining effect on the profit margin of Chinese industrial enterprises,and the result is still valid after considering the endogenous problem,replacing interpreted variable,using difference-in-difference estimation and replacing the explained variables.As for the mechanism,this paper find that the minimum wage standard mainly affects the profit margin of Chinese industrial enterprises through cost effect and productivity effect.Thirdly,the influence of minimum wage on profit margin of Chinese industrial enterprises is heterogeneous in ownership,region and industry.The negative effect of minimum wage on the profit margin of non-state-owned enterprises is greater than that of state-owned enterprises.The profit margin of enterprises in eastern and western regions are significantly affected by the minimum wage standard,while the central and northeast regions are not.Besides,the profit margin of enterprises in the industries of smaller scale and lower average wage are greatly affected by the minimum wage standard.Finally,relevant policy suggestions:First,the formulation of the government’s minimum wage standard should comprehensively consider the characteristics and differences of regions,enterprises and industries,and gradually improve the design of the minimum wage system;Second,the government should not only propagandize and guide enterprises and workers to establish correct legal awareness,supervise the implementation of the minimum wage system,but also give policy and financial support to industrial enterprises through fiscal and tax policies;Third,enterprises should improve their competitiveness by adjusting the allocation of production factors,increasing R&D investment,encouraging innovation and improving the ability of capital utilization.