[Working Paper No.12]Tony Fang&Carl Lin: Minimum Wages and Employment in China
Abstract:
Since China promulgated new minimum wage regulations in 2004, the magnitude and frequency of changes in the minimum wage have been substantial, both over time and across jurisdictions. This paper uses county-level minimum wage panel data and a longitudinal household survey from 16 representative provinces to estimate the employment effects of minimum wage changes in China over the period of 2004 to 2009. In contrast to the mixed results of previous studies using provincial-level data, we present evidence that minimum wage changes have significant adverse effects on employment in the Eastern and Central regions of China, and result in disemployment for females, young adults, and lowskilled workers.
Keywords: minimum wage, China, employmen
Keywords: minimum wage, China, employmen
Authors:
Tony Fang, Monash University, University of Toronto and IZA;
Carl Lin, Beijing Normal University and IZA
1. Introduction
Since China issued its new minimum wage regulations in 2004, minimum wages have sparked intense debate in the country. There is little doubt that employees generally welcome the minimum wage. However, there is considerably less agreement regarding whether the minimum wage is effective at attaining its goals. The issue, from the time of its introduction, has been highly controversial among scholars and policy-makers.
The contentious nature of the minimum wage policy in scholarly work does not allow for its impact to be easily understood. However, the initial evidence seems to show that the magnitude and frequency of minimum wage changes have been substantial both over time and across different jurisdictions, especially after the year 2003. For example, in January 2004, China promulgated new minimum wage regulations that required local governments introduce a minimum wage increase at least once every two years, extended coverage to self-employed and part-time workers, and quintupled the penalties for violation or noncompliance. The new regulations were put into effect in March 2004, leading to frequent and substantial increases in minimum wages in the subsequent years.
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