The Impact Of The Economic Restructuring And The Minimum Wage On The Employment Structure

Employment has been affected by various factors and the minimum wage regulation plays an important role. When it comes to analyzing the economic impact of minimum-wage regulation, there are generally two theoretical points of view. One point of view holds that in the competitive labor markets if a minimum wage is set higher than the market equilibrium wage, some disemployment would be resulted in and the social welfare would decline. Another maintains that if employers have monopsony power, an imposed intermediate minimum wage rectifies the distortion caused by monopoly and increases the social welfare. Such conclusions are established in ideal conditions. In the follow-up studies of other scholars, the assumptions which do not correspond with the actual situation are examined and different conclusions are drawn. However, most studies are confined in a relatively static framework, assuming that the supply and demand of labor markets remain relatively stable and not involving any change in economic restructuring.In contemporary China, the fact is that the economic restructuring has altered the product demand of different industries, which in turn changes the demand curve of labor markets in the related trades. For example, with income increasing, car manufacture, sales, repairs, maintenance, and leasing are growing rapidly. So is the labor demand in such industries. Differently, the decline in external demand caused by the financial crisis has forced some export-orientated enterprises to dismiss workers. As to the labor supply, the Household Registration System and the skill barriers prevent the free flow of labor, which further affects the supply curve of labor markets. Therefore, the economic transformation and labor barriers dynamically change the demand and supply of labor markets and become the most important practical constraints when it comes to analyzing the economic impact of minimum-wage regulation.The labor markets are divided into the high-wage one and low-wage one for simplicity. Modals are adopted to demonstrate the difference in labor flow in these two markets. To be specific, the high-wage industries are developing quickly and the labor demand increases enormously with expanding markets. However, immobility of labor markets prevents its labor supply increasing at the similar rate. Accordingly, the labor shortage leads to a quick rise in wages of such industries. On the other hand, it is quite different in the low-wage labor market. Employment rises slowly or even declines because of shrinking product markets. At the same time, the newly entered labor force together with the original one is not qualified for high-wage jobs, so they stay in the low-wage markets, waiting for low-wage jobs. Therefore, the oversupply of labor drags down the increase of the wage.Therefore, this dissertation concludes that with the premise of dynamic change in labor supply and labor demand, appropriate increase in minimum wage together with the supporting measures is rewarding to enhance the labor mobility, in the long run improve the labor allocation, rectify the imbalance of the employment structure, and eventually facilitate the economic restructuring.