Minimum Wage,Migration And Rural Income Inequality

Common prosperity requires the establishment of a scientific public policy system to form a rational distribution pattern for everyone.In recent years,the urban-rural income gap,which has a high contribution to the inequality of China,has gradually decreased.The inequality within urban and rural areas has become noticeable.As the active allocation of labor between urban and rural areas has been regarded as an important part of China’s economic development,the exchanges and interactions between cities and rural areas have been continuously strengthened.If the effects of policies inside cities spills over to rural areas,the cost-benefit analysis of macro-decision would be more complicated,which may directly affect the formulation of national and regional policies,and then change the macroeconomic development pattern.However,the research perspectives of relative literatures mostly focus on the interior of the countryside,and the potential effect of urban shocks on rural inequality has not been considered from the logic of urban-rural interaction.Therefore,this paper attempts to use the minimum wage policy as an example to explore the effect of urban policy on rural inequality in the context of population mobility.The minimum wage policy is a city-led policy tool aimed at improving the welfare of low-income groups.Due to the high overlap between urban low-income groups and migrant workers,the policy consequences of the minimum wage may be transmitted to rural areas through the migration decisions of migrant workers,which provides a possibility to study the impact of urban policies on rural inequality.If the minimum wage policy increases the income of rural residents,it may narrow the rural income gap.But if the minimum wage policy also has negative impacts on their employment opportunities it may in turn worsen the rural income distribution pattern.In the past literature,the relationship between minimum wage policy and enterprises or labor force is usually regarded as the research goal.As a policy means to directly intervene in the income of some groups,the impact of minimum wage policy on income inequality has also been paid high attention to.But the objects of these research are mostly limited to the internal income disparities of industries and cities.This research focuses on examining the impact of minimum wage policies on rural income inequality,and complements relevant literature.In order to explore the causal effect of the minimum wage on rural income inequality to verify the spillover effect of urban policies on rural areas,this paper conducts the following work.First of all,based on the micro-survey data of the fifth census,this study depicts the population flow network between districts and counties in China,and calculates the“expected minimum wage”faced by the outflow districts and counties in combination with the minimum wage standards for in-migrant districts and counties.Secondly,based on the exogenous variations of minimum wage standards in terms of time and space,this study constructs a two-way fixed-effect model to identify the causal effect of changes in minimum wage on income inequality within rural areas which the population emigrated.Finally,this paper discusses the heterogeneity effect of the minimum wage on the migration and income of rural residents from the dimensions of skills,gender and age,to demonstrate the mechanism.The main innovation of this paper is to link urban and rural areas through population mobility networks,analyze the effect of changes in urban minimum wage standards on rural income inequality,and verify the spillover effect of urban policies on rural areas.Specifically,there are two contributions as follows.Firstly,this study extends the research perspective of rural issues to urban shocks,providing new possibilities for explaining migration decisions and income changes of rural residents,and income inequality within rural areas.Secondly,based on the literatures about how minimum wage policy affects enterprises,urban labor,and the income gap within cities,this paper supplements the impact of the minimum wage policy on rural income inequality,and provides a reference for the formulation of policies related to primary distribution at the macro level.This paper finds that the minimum wage has a significant effect on the income inequality of rural areas.For every 10%increase in the minimum wage,the Gini coefficient and Theil index of rural residents’income increase by 0.0063 and 0.0052,respectively.This is because the minimum wage increases the income of some rural residents,but reduces the employment opportunities and income of the relatively disadvantaged labor force.The regression results show that for every 10%increase in the expected minimum wage,the wage income of rural residents working in cities increases by 3.18%,the probability of rural residents moving into cities decreases by12%,and the overall employment income of rural residents decreases by 10%.In terms of sub-groups,the increase in the minimum wage only has a significant negative impact on the oppotunities and income of the low-skilled,female,and elderly laborers,which reduces the income of rural households dominated by such vulnerable labor groups and worsens the rural income distribution pattern.On November 3,2020,Xinhua News Agency released the"Suggestions of the Central Committee of the Communist Party of China on Formulating the 14^th Five-Year Plan for National Economic and Social Development and the Long-term Goals for2035".It stated that efforts should be made to increase the income of low-income groups and expand the middle-income group,emphasizing the improvement of the wage system and the rational wage increase mechanism.The investigation of the minimum wage also aims to provide reference for these objects of policies.The research in this paper shows that the impact of the adjustment of the minimum wage on rural residents is still in line with the traditional economic logic,that is,artificially increasing the minimum wage can increase the income of some people,but eliminate workers who are willing to accept lower wages out of the labor market.At the same time,population mobility makes urban policies have a certain spillover effects—changes in urban minimum wage not only have an effect within cities,but are also transmitted to rural areas through mobile populations.From the perspective of urban-rural integration,the impact of the minimum wage on urban employment opportunities reduces the migration and income growth of low-skilled groups,which is not conducive to population mobility and transfer,and further deteriorates the income distribution pattern in rural areas.Therefore,the government should take into account the employment balance in the labor market when adjusting the minimum wage,considering the advantages and disadvantages fully,to protect the welfare of low-income groups.