Research On The Impact Of Minimum Wage Increases On Enterprise Labor Cost Saving Decisions

Achieving common prosperity for all people is a long-term and arduous task,among which narrowing income inequality is crucial.The minimum wage legislation,as a policy tool for government intervention in the initial distribution,has been found in research to play a positive role in narrowing income gaps and improving income distribution patterns.However,previous studies have identified issues such as perspective divergence and conflicting research results when examining corporate labor cost-saving decisions,requiring systematic and further in-depth investigation.Meanwhile,with the rapid development of digital technologies such as big data and artificial intelligence,employment or labor in new forms such as platform economy and flexible employment has changed traditional employment structures and methods.Existing research also lacks consideration of the role of the minimum wage system in protecting worker incomes based on new employment models.Therefore,it is necessary to systematically examine the impact of minimum wage increases on corporate labor cost-saving decisions using new data and research methods,which holds significant academic value and practical significance.This paper first introduces the importance of the minimum wage system in advancing common prosperity in China.Subsequently,it systematically reviews existing research on the minimum wage system’s relationship with enterprise labor costs,capital investment decisions,and labor cost-saving decisions,identifying areas for improvement.Furthermore,this paper examines the development history of the minimum wage system and the basic characteristics of minimum wage standards,as well as investigates the impact of minimum wage increases on wage levels.Building upon the review of existing literature and understanding the fundamental characteristics of China’s minimum wage system,this paper separately examines the external and internal marginal effects of minimum wage increases on enterprise labor cost-saving decisions.External marginal effects are approached from the perspective of enterprise capital investment decisions,while internal marginal effects are divided into short-term,medium-term,and long-term periods based on the sustainability and duration of enterprise labor cost-saving decisions.This division considers aspects such as employment decisions,flexible employment decisions,and decisions related to digital technology innovation.Specifically,this paper theoretically elucidates the mechanisms by which minimum wage increases affect enterprise capital investment decisions,employment decisions,flexible employment decisions,and digital technology innovation decisions,and proposes research hypotheses.Subsequently,this paper empirically tests these hypotheses using various micro-databases,including China’s industrial enterprise database,China’s enterprise business registration database,and China’s household financial survey data.Finally,based on the research findings,this paper proposes policy recommendations.Based on the analysis above,this paper arrives at the following key findings:Firstly,through a description of the basic situation of China’s minimum wage system,three conclusions are drawn.(1)Although China’s minimum wage system has a relatively short development history,it is already relatively complete at the institutional level.(2)In terms of the absolute values of minimum wage standards,since2004,minimum wage standards in various provinces and cities have risen rapidly.Currently,there are still disparities in minimum wage standards between regions,but these disparities are gradually narrowing.(3)The synchronization between minimum wage standards and urban macroeconomic conditions is relatively poor,with more influence from artificial factors of government decision-making departments.After understanding the basic situation of the development of China’s minimum wage system and the adjustment of minimum wage standards,this paper analyzes the coverage and implementation of the minimum wage,focusing on demographic characteristics and enterprise capital characteristics,and empirically verifies the promotion effect of minimum wage increases on worker wage income and enterprise wage expenditure through regression analysis.Secondly,from the perspective of capital investment decisions,this paper examines the external marginal effect of minimum wage increases on enterprise labor cost-saving decisions.The results indicate that minimum wage increases inhibit foreign direct investment but promote domestic capital investment.Heterogeneity analysis reveals that the inhibitory effect of minimum wage increases on foreign investment is smaller for enterprises with high levels of human capital and strong competitiveness,while the promoting effect on domestic capital investment for non-state-owned enterprises and enterprises in the eastern region is more significant.Given that minimum wage increases have opposite effects on the investment decisions of these two types of capital,this paper further explores the impact of minimum wage increases on the total capital of enterprises,finding that minimum wage increases have a significant positive effect on total enterprise capital,mainly attributed to the promotion effect of minimum wage increases on domestic capital replacing foreign capital.Thirdly,this paper examines the internal marginal effect of minimum wage increases on labor cost-saving decisions.Using the decision cycle as a framework,it analyzes how enterprises achieve labor cost savings in the short term,medium term,and long term.The study finds that minimum wage increases prompt enterprises to reduce the number of employees in the short term,increase the use of flexible employment in the medium term,and strengthen digital technology innovation in the long term.Heterogeneity analysis reveals that the negative impact of minimum wage increases on the number of employees is more significant in non-state-owned enterprises,foreign direct investment enterprises,and capital-intensive and technologyintensive industries;while the positive impact on digital technology innovation is more significant in state-owned enterprises,non-digital industries,and manufacturing industries.Finally,based on the research conclusions,this paper proposes policy recommendations.Firstly,establish and improve the minimum wage formulation and evaluation system to ensure its compatibility with economic development and labor market demand.Secondly,adopt differentiated policy measures for different types and scales of enterprises to alleviate the cost pressure brought by minimum wage increases on enterprises,thereby stabilizing capital investment.Thirdly,correctly understand and guide flexible employment,regulate flexible employment methods to meet the needs of enterprise flexible employment while safeguarding the rights and interests of workers.Finally,through policy incentives and support,promote enterprises to strengthen technological innovation,improve labor productivity,alleviate the impact of minimum wage increases on enterprises,and promote sustainable economic development.Compared with existing research,this paper’s marginal contributions are reflected in three aspects:(1)Innovative research perspectives.Firstly,the research perspective is more comprehensive,and the research content is more complete.This paper places typical enterprise labor cost-saving decisions under the same research framework,while examining the external and internal marginal effects of minimum wage increases on enterprise labor cost-saving decisions.In the analysis of internal marginal effects,this paper conducts analysis from the perspectives of short-term,medium-term,and long-term decisions.Secondly,the research perspective is novel.This paper explores for the first time the impact of minimum wage increases on enterprise flexible employment decisions and digital technology innovation decisions,which have not been deeply analyzed in previous studies,and are closely related to new trends in economic operation,with both theoretical value and practical significance.(2)Innovative data.Previous studies have been limited by data constraints,such as incomplete collection of minimum wage data and difficulty in obtaining microdatabases,resulting in divergent research conclusions or difficulty in generalization due to insufficient sample representativeness.This paper comprehensively uses multiple large-scale micro-databases,covering commonly used micro-databases such as China’s industrial enterprise database,China’s household financial survey data,and listed company databases,while innovatively utilizing China’s enterprise business registration database and patent database.The latter is a full dataset that can effectively solve the problem of sample representativeness.(3)Innovative measurement indicators.This paper innovatively uses full enterprise business registration data to identify flexible employment service providers,constructing a measure of the supply of flexible employment services;and uses IPC classification codes to identify digital technology patents,and uses the quantity of digital technology patents to measure enterprise digital technology innovation levels.Specifically,this paper,based on large databases such as enterprise business registration data and patent data,uses text analysis methods and language models in the field of artificial intelligence to identify flexible employment service providers and digital technology patents.These cutting-edge identification methods improve the efficiency and accuracy of sample identification,making the indicators constructed in this paper more reliable.