Does The Minimum Wage Policy Affect The Wage-setting Behavior Of Large Enterprises?

The minimum wage policy is a "bottom-up" guarantee policy,whose original intention is to ensure the basic living of workers and their family members.Generally,the minimum wage standard is relatively low and belongs to the "subsistence" wage level.Traditional literature mostly believes that workers who receive the minimum wage are mainly low-skilled,low-educated,young,and have short working hours.These workers are mainly distributed in small and micro enterprises and labor-intensive enterprises.Therefore,the main impact of the minimum wage policy is on labor-intensive small and micro enterprises.However,this article found that the salary setting of large enterprises is also affected by the minimum wage policy.This article first explains it theoretically.China has entered an era of shortage of front line workers,and with overtime work being very common,the pressure on labor costs in large enterprises is also enormous,and they will reduce labor costs in various ways.Large enterprises generally set the basic wages of front line workers at the very low minimum wage standard,and overtime wages are still calculated based on the minimum wage standard,but they comply with relevant provisions of the "Labor Law" Overtime pay is multiplied by a coefficient of 1.5 on normal working days,2 on weekends,and 3 on national holidays.There are two effects of this approach:on the one hand,it ensures that the enterprise is complying with relevant laws and regulations;on the other hand,for employees,because the basic wage is relatively low,they must work overtime to achieve a higher wage level.Of course,Employee overtime increases labor supply,alleviates labor shortages,saves enterprise social insurance expenditures,and is very beneficial to enterprises.This article uses enterprise survey data from Jiangsu Province.The proportion of employees whose monthly wages are based on the minimum wage standard and the proportion of employees whose basic wages or overtime wages are calculated based on the minimum wage standard are used as the explained variables for empirical analysis.Consistent with traditional literature,the proportion of employees whose monthly wages are based on the minimum wage standard is relatively high in small and micro enterprises,and the larger the enterprise,the lower this proportion.This is because the total monthly salary of employees in small and micro enterprises is relatively low and is greatly affected by the minimum wage.This article’s new finding is that the larger the enterprise,the higher the proportion of employees whose basic wages or overtime wages are calculated based on the minimum wage standard.The larger the enterprise,the more likely it is to set employees’ basic wages at the minimum wage standard and calculate overtime wages based on the minimum wage standard.The empirical findings of this article strongly verify the hypothesis of the theoretical model.The salary combination of "low basic wages + high overtime pay" will induce employees to work overtime to earn higher income,which can alleviate the labor shortage problem,especially in large manufacturing enterprises,and to a certain extent,reduce the employment costs of enterprises.The fact that large enterprises’ wage setting is based on the minimum wage standard is not a normal phenomenon,which may be related to low profitability,small profit margins,and high labor cost pressures.Finally,this paper put forward the corresponding policy recommendations.