The Employment Effect Of The Minimum Wage Increase

The minimum wage system is one of the main methods for governments to control national the labour market.In our country,the former Ministry of Labor promulgated the Minimum Wage Regulations of Enterprises in 1993.the Ministry of former Labor and Social Security released the new Regulation on Minimum Wage in 2004,which marked the exhaustive implementation of minimum wage system.Hence,the adjustment frequency and adjustment range of minimum wage standard are on the rise.The minimum wage increased substantially,to what extent will affect the employment situation of China.Based on the theory of labor economics,when labour market is in a state of perfect competition,the increase in the minimum wage has a negative import on employment of workers.However,when labour market is in the case of a buyer's monopoly,the increase in minimum wage has a positive import on employment of workers.Since labour market in the real economy is usually between fully competition state and monopsony state,it is economy theoretically not likely to clearly identify the employment effects of the minimum wage increase,and it must be solved through the means of empirical research.Based on the individual micro-survey data of China Family Panel Studies in 2010,2012,and 2014,in accordance with the idea of natural experiment,the group whose wages are up to the 3rd quartile of the current wage distribution is used as the reference group,the groups whose wages are more than the minimum wage for the year but less than next's year minimum wage are directly affected by the minimum wage.And,groups whose wages are up to the minimum wage in next year but less than the 2nd quartile of the wage distribution for the year,and those whose wages are more than the 2nd quartile of the current wage distribution but below the 3rd quartile of the wage distribution are indirectly affected by the minimum wage.Using panel data model is to analyze employment effect and employment stability effect of minimum wage increase.The analysis result of the employment effect shows that,after controlling unobserved individual heterogeneity,minimum wage is increased by 10%,the employment percentile of the directly affected group will increase by 1.093%,which has a certain negative spillover effect on the employment percentile of the indirect import group,but is significantly smaller than the positive effect on the direct impact group.The analysis result of the employment stability effect shows that,the increase of minimum wage has a positive effect on the employment stability of the direct impact group,and has a negative spillover effect on the employment stability of indirect impact group,but less than the positive effect on the direct impact group.However,from the perspective of significance,the increase of the minimum wage standard is not significant the for the employment stability effect of negative group.The possible innovations of this paper are as follows:(1)The researches on the employment effect of the increase of the minimum wage mainly select the provincial,municipal or enterprise level data as sample,resulting ignoring the differences between different individuals.But,this paper use the micro-data of China Family Panel Studies to research the issues after controlling unobserved individual heterogeneity.(2)Studies have analyzed and demonstrated the issues of employment,without considering whether the employment is stable.Therefor,in addition to analysis the employment effects of the minimum wage,the paper also explore the employment stability effects of the minimum wage.The research results have vital reference value.First,The increase of minimum wage standard has not reduced employment.On the contrary,it is has a certain positive effect on employment,indicting that the labor market has a certain monopoly.Therefor,in combination with the local economic development level and the actual situation of enterprise,the minimum wage standard still needs to be appropriately increased,and then narrowing the incomes gap of the laborers to a certain extent,and promoting harmonious development of society.Second,When setting the minimum wage,local government should treat labor differentiate as much as possible,which will be conducive to further maintain social equity.Therefor,when setting the minimum wage system,each government not only consider regional differences,but also consider industry differences.