Minimum Wage Standard,Labor Market Segmentation And Withdrawal Of Foreign Capital

As one of the basic policies to ensure people’s livelihood,the minimum wage standard has been uniformly implemented throughout the country since 2004,providing living security for the working people and improving people’s living standards.For foreign-funded enterprises that invest directly in China,the rise of the minimum wage has increased the labor cost and reduced the profit margin of enterprises,enterprises have to readjust their production layout and decision-makingAs the host country,the main reason for attracting foreign investment in China includes cheap labor,so labor cost will affect the investment decision of foreign enterprises.When the government adjusts the minimum wage level,the most direct impact on enterprises is the increase in investment in employment and the increase in the cost of investment in operation,which is not helpful to the long-term and secure organization of companies.The cost input of enterprises is limited.For most foreign-funded enterprises,when the employment cost increases,it is bound to reduce the investment in other aspects to make up for the investment difference.At this time,the technological innovation investment of enterprises will be affected.Most of the enterprises that make foreign direct investment in China are labor-intensive enterprises,so enterprises are most likely to reduce costs and maintain business stability by reducing investment in technological innovation.Otherwise,foreign-funded enterprises may withdraw their capital in order to reduce unnecessary losses for long-term operation and stable development.China has a vast geographical area and uneven distribution of urban and rural resources.The labor market is not a unified whole,showing different changes with economic development.Among them,labor market segmentation is an important performance.The more serious the segmentation of the labor market,the greater the wage level difference between regions,and the higher the cost of employing workers,which is not helpful to the long-term stable growth of company and the process of market industrialization.As a natural result of China’s reform and development,with the difference of the minimum income standard,labor market segmentation will affect the operating cost of enterprises by affecting the wages of workers,so it is also an important factor to be considered in the operation of enterprises.In order to further clarify the impact of the minimum wage system on the withdrawal of foreign-funded enterprises and the role of labor market segmentation in it.Firstly,this paper sorts out the existing relevant literature and discusses the theoretical mechanism of foreign capital withdrawal from three aspects: cost effect,R＆ D innovation effect and regulation effect,With the continuous adjustment of the minimum wage,As a result,the employment cost in the enterprise operation also increases.When the employment cost increases more than expected,the enterprise operation is difficult to maintain,resulting in the withdrawal of foreign-funded enterprises.In addition,in the context of labor market segmentation,with the increase of the minimum wage standard,the average income gap of labor force has narrowed.However,due to the poor mobility of labor force and the surplus of low skilled labor force,it is difficult for enterprises to use the change of the minimum wage standard to adjust the employment structure and employment cost.The change of the minimum wage standard leads to the increase of labor cost of enterprises,The reduction of profit space further promotes the withdrawal of foreign capital,which leads to the first hypothesis: the minimum wage promotes the withdrawal of foreign capital,and the labor market segmentation accelerates this promotion effect;The higher the degree of labor market segmentation,the worse the mobility of workers in the region,resulting in the surplus of low skilled labor force.It is difficult for enterprises to adjust costs through employment structure,and the employment costs of enterprises increase,so as to promote the withdrawal of foreign capital.From this,the second hypothesis is drawn: the minimum wage standard promotes the withdrawal of foreign-funded enterprises through cost effect;When the employment cost of enterprises increases,it is bound to reduce the investment in other aspects.For labor-intensive enterprises,the investment in technological innovation will be compressed,which is not helpful to the strength of company operation and will eventually lead to the withdrawal of foreign-funded company.Based on this,we put forward the third hypothesis: the minimum wage affects the withdrawal of foreign-funded enterprises through the effect of technological innovation.Empirically,this essay uses the database of Chinese industrial companies and the information of 30 provinces and cities to construct a logit econometric model to investigate the impact of the minimum wage on the withdrawal of foreign-funded enterprises,the regulatory consequence of labor market division and the impact mechanism of the minimum wage on the withdrawal of foreign investment.The results show that the extend of the lowest wage raises the chance of capital withdrawal,and the labor market segmentation accelerates the promotion effect of the rise of the lowest income on the withdrawal of foreign capital.After considering every endogenous problem,changing the dimension process of the core variables in the paper,and changing the empirical regression model,the conclusions of this paper are tenable.From the results of heterogeneity analysis,low productivity,foreign-funded enterprises in Hong Kong,Macao and Taiwan,enterprises in the mid region and manufacturing industry are vulnerable to the minimum wage and labor market segmentation;The results of mechanism test also show that the lowest income standard develops the withdrawal of foreign-funded company through cost effect and technological innovation effect.Finally,according to the results of the above empirical investigation,this paper advances relative policy recommendations from five aspects: the administration should modify and improve the minimum wage system as soon as possible according to China’s national conditions,optimize the enterprise structure,pay attention to technological development,enterprises actively respond to policy adjustment,take differential treatment support measures,optimize the industrial structure.