A Study On The Implications Of An Increase In Labor Cost In Performance Of Enterprise For Manufacturing Industries

With the rapid development in the past four decades of reform and opening up,China’s manufacturing industries’ output have become the first in the world and have made important contributions to economic and social development.In 2016,China’s GDP was 74412.7 billion yuan,the industrial added value was 24786 billion yuan,and the contribution rate to GDP reached 33.31%.In 2015,China officially launched the "made in China 2025" strategy,aiming at strengthening the innovation capacity of manufacturing industries,promoting the upgrading of manufacturing industries and achieving the strategic goal of manufacturing power country.However,the development of China’s manufacturing industries is in the situation of "internal and external problems".In the external,China’s manufacturing industries faces the severe challenge of "two-way squeeze " in developed countries and other developing countries.In the internal,the rising labor costs,the heavy tax burden,and the high price of land,which make the product cost of manufacturing industries continuously rising,and the international competitiveness is gradually declining.Many people pay attention to the influence of rising labor costs to manufacturing industries in our country.On the one hand,the income effect of rising labor costs promoted the production efficiency keep rising,and was beneficial to the manufacturing industries’ transformation and upgrading;On the other hand,the cost effect of rising labor costs had increase the cost.For the moment,Is the rising labor costs good or bad at the performance of manufacturing enterprises in our country? What is the impact path? How to deal with the impaction of the rising labor costs? All these questions deserve further study.Based on the theory of efficiency wage and equity theory,this paper expounds the influence of rising labor costs on the business performance of manufacturing industries.Second,this paper has using 1259 China’s manufacturing listed companies’ during 2009-2016 data as sample,by the factor analysis method to calculate comprehensive score of business performance,and on this basis,building the PVAR model to empirical analysis the implication of the rising labor costs to the business performance of manufacturing industries in our country.Finally,the sample is divided into different regions and different types according to the province where the company is registered and the subdivision industry.Then this paper discusses the implication of rising labor costs for different regions and different types of manufacturing industries business performance.In this paper,the basic conclusions are as follows: First,the theoretical analysis shows that based on the duality of labor costs,it is necessary to comprehensively consider the labor cost’s effect of cost and income when study on the implication of the rising labor cost of the business performance of manufacturing industries.Second,the empirical analysis shows that between 2009-2016,China’s labor costs have increased greatly while the business performance of manufacturing industries has decreased significantly.The rising labor costs has a significant negative impact on the business performance of manufacturing industries.Third,the rising labor costs had different impact on the business performance of different regions and different types of manufacturing enterprises.Based on the above conclusions,this paper argues that China’s manufacturing industries should take advantage of existing advantages to speed up the transformation and upgrading,the eastern,central and western regions should adopt coordinated development strategies based on local conditions,different types of manufacturing should make up the short board to the upstream of the industry chain.