The Employment Effects Of China’s Minimum Wage System

The minimum wage system is a kind of law form that ensures workers can obtain a legal form of wage income to maintain the reproduction of labor power after completing a necessary work through the legislative process.China began to implement the minimum wage system in 1993. During the past 21 years, with the development of the society and economy, our labor market has changed a lot but the only thing that remains is the serious employment problem. Our country has a large population and a lot labor force, so the labor market is in a state of supply exceeding demand in a long time. How to safeguard the employment has been the top priority of economic development. At the same time, due to the imperfect of our labor market, the mechanism of protecting the workers is not sound, laborer especially those in the bottom has been in a weak position. In order to protect the rights and interests of workers while promoting employment, our country has made a lot reforms and adjustments of the minimum wage system. Since the beginning of the establishment of the minimum wage system, it has aroused widespread concerns. The economic effects of minimum wage have been controversial, especially the employment effects. Nevertheless, an increasing number of countries have begun to implement this system. So it is important to analyze the employment effects of minimum wage system and find the necessary condition to promote employment. Improving our country’s relevant conditions can achieve the positive role of minimum wage on employment. By this way can we form a win-win situation, which is a vital significance to our country.This article first summarizes the research achievements of the scholars before. Secondly it introduces the basic situation and development of our country’s minimum wage system. Thirdly, it deeply and systematically analyses the effect of minimum wage on employment. In the short term, based on the type of the labor market, the size of institution coverage, the influence of minimum wage system on employment effect is different. However, the incentive effects of the minimum wage system generated a certain role in promoting employment. In the long run, the minimum wage system has two kinds influence on the employment. Direct influence refers to the minimum wage system affects the employment by changing the original wage. Indirect influence refers to the minimum wage system influence employment by the income distribution, industrial upgrading and human capital investment. Through pure theoretical analysis, both in the long time and in the short time, the employment effect of minimum wage system is uncertain. Therefore, this article analyzes the necessary requirements that can make minimum wage have a positive impact on employment. It includes four basic principles that are a reasonable minimum wage standard, an adequate reserve of human capital, a system that can promote technology and a perfect social security system. Fourthly, in order to verify the conclusion from the theory, this paper statistics and collects the data since the implementation of “The Minimum Wage Standard”. In accordance with the administrative division in our country, this paper empirically tests employment effect of the eastern, central and western three areas through the OLS regression. The final result is consistent with the theoretical analysis, that is, due to the different economic development level, the different labor market characteristic and the different improving degree, the impact of the minimum wage system in China is also different. Fifthly, in order to make the minimum wage system in our country play a positive role in promoting employment, the author analyzed the United States, Australia, Britain’s minimum wage system for our reference. At last, the author analyzes the necessary conditions according to the theory and put forward five suggestions to improve the minimum wage system in China. Firstly, we should adjust our minimum wage standard properly; secondly, we should keep an eye on the performance of the minimum wage system; thirdly, we should reform the management system of technology; fourthly, we should improve the education system; fifthly, we should improve our society security system.