DOCSLIB.ORG

The Minimum Wage, Inequality and Employment in China

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Minimum Wage, Inequality and Employment in China THE MINIMUM WAGE, INEQUALITY AND EMPLOYMENT IN CHINA by RUOSI LU A thesis submitted to the University of Birmingham for the degree of DOCTOR OF PHILOSOPHY Department of Management Birmingham Business School College of Social Sciences University of Birmingham October 2015 University of Birmingham Research Archive e-theses repository This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder. ABSTRACT This study looks at the welfare implications of the minimum wage in China, and covers three topics: the minimum wage and wage inequality, the minimum wage and employment, and the minimum wage and the gender wage gap. The main finding is that the welfare implications of the minimum wage in China are mixed, with both positive and negative welfare effects. Four main conclusions are reached. Firstly, minimum wages can effectively reduce overall wage inequality at the municipal level (despite non-compliance) through raising individual wages at the lower end of the wage distribution. Secondly, minimum wages generally have significantly negative effects on urban employment with some indication of more marked effects for traditionally disadvantaged groups such as youth, older workers, and women. Thirdly, minimum wages significantly raise women’s wages relative to men’s at the lower quantiles of wage distribution, thus reducing the gender wage gap. Together with the second result, this means that the minimum raises women’s relative wages, while lowering their employment. Fourthly, these three results are especially robust during 2004-2007, when the minimum wage system was reinforced. Specific point estimates found in this study are as follows. As regards minimum wage impacts on wages, we find that a 10% increase in the minimum wage raises the wage at the 10th percentile by up to 6%, and also reduces the 10-60 wage gap by almost 10%. Given such significant wage effects, we expect employment effects, and find that elasticity of employment with respect to the minimum wage for compliant workers is about -0.2 pre- 2004 and -0.3 post-2004. The figure for compliant youth is higher, approximately -0.4 pre- 2004 and -0.8 post-2004. However, we also find that the negative employment effects for compliant workers are counterbalanced to some extent by significant positive effects for the non-compliant. Overall employment effects therefore appear small for most groups, though the minimum wage causes crowding into non-compliant jobs. DEDICATION To My Grandfather in Heaven ACKNOWLEDGEMENTS I am very grateful to my supervisor, Prof. Stanley Siebert, and my vice supervisor, Prof. Xiangdong Wei, for all their invaluable guidance and help during my PhD study. My respect and gratitude to them is beyond expression. I would like to thank very much the Website of China Labour Consultation (zhongguo laodong zixun wang, www.51labour.com). This business website opened its data to me for free after I presented my research plan on the minimum wage. Thank you for your generous help. Thanks go to professors and my friends at the University of Birmingham and Lingnan University for their help and precious kindness during my most difficult times. I greatly appreciate my parents and husband’s support in taking care of my babies for me, especially my dearest father, Zaixin Lu. Last but not the least, thanks go to my two babies: Xingkan and Xingyi; you are both gifts from God, granting me courage and strength to overcome all difficulties. TABLE OF CONTENTS TABLE OF CONTENTS .............................................................................................................. I LIST OF FIGURES .................................................................................................................... III LIST OF TABLES ...................................................................................................................... IV LIST OF APPENDICES ........................................................................................................... VII ABBREVIATIONS .................................................................................................................. VIII CHAPTER 1: INTRODUCTION ................................................................................................ 1 1.1 Institutional background ..................................................................................................... 2 Administrative and regional characteristics ...................................................................... 3 The labour market .............................................................................................................. 4 The minimum wage system ............................................................................................... 7 1.2 Research advantages, contributions and findings ............................................................. 11 1.3 Thesis structure ................................................................................................................. 13 CHAPTER 2: LITERATURE REVIEW .................................................................................. 15 2.1 Introduction ...................................................................................................................... 15 2.2 The minimum wage and wage inequality ......................................................................... 16 The minimum wage and inequality in developed countries ............................................ 17 The minimum wage and inequality in developing countries ........................................... 24 The minimum wage and inequality in China................................................................... 26 Conclusions on inequality ............................................................................................... 27 2.3 The minimum wage and employment .............................................................................. 28 The minimum wage and employment in developed countries ........................................ 29 The minimum wage and employment in developing countries ....................................... 31 The minimum wage and employment in China............................................................... 33 Conclusions on employment effects ................................................................................ 44 2.4 The minimum wage and the gender wage gap ................................................................. 44 The gender wage gap in China ........................................................................................ 45 The minimum wage effect on the gender gap ................................................................. 48 2.5 Conclusion ........................................................................................................................ 50 Figures and tables ................................................................................................................... 52 CHAPTER 3: DATA.................................................................................................................... 55 3.1 Introduction ...................................................................................................................... 55 3.2 Data of the Urban Household Survey ............................................................................... 57 An overview of UHS data ............................................................................................... 57 UHS data used in this study ............................................................................................. 60 3.3 Data on minimum wages .................................................................................................. 62 3.4 Covariates and statistics ................................................................................................... 66 Combination .................................................................................................................... 66 The minimum wage ......................................................................................................... 67 Other covariates ............................................................................................................... 69 3.5 Conclusion ........................................................................................................................ 72 Figures and tables ................................................................................................................... 74 Appendices ............................................................................................................................. 79 CHAPTER 4: THE MINIMUM WAGE AND WAGE INEQUALITY .................................. 85 I 4.1 Introduction ...................................................................................................................... 85 4.2 Compliance ....................................................................................................................... 86 An overview of compliance ............................................................................................
Load more

Recommended publications
  • China's Labor Question
    Christoph Scherrer (Ed.) China’s Labor Question Rainer Hampp Verlag München, Mering 2011 Bibliographic information published by the Deutsche Nationalbibliothek Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at http://dnb.d-nb.de. ISBN 978-3-86618-387-2 Picture on cover: Workers are seen inside a Foxconn factory in the township of Longhua in the southern Guangdong province May 26, 2010 (reproduced by permission of REUTERS/Bobby Yip) First published in 2011 © 2011 Rainer Hampp Verlag München, Mering Marktplatz 5 86415 Mering, Germany www.Hampp-Verlag.de All rights preserved. No part of this publication may be reprinted or reproduced or util- ized in any form or by any electronic, mechanical, or other means, now known or hereaf- ter invented, including photocopying and recording, or in any information storage or re- trieval system, without permission in writing from the publisher. In case of complaints please contact Rainer Hampp Verlag. TABLE OF CONTENTS Acknowledgements............................................................................................................. vi Notes on Contributors........................................................................................................ vii Introduction: The many Challenges of Chinese Labor Relations..................................1 Christoph Scherrer Part I: The Basic Setting 1. Perspectives on High Growth and Rising Inequality .......................................................7
    [Show full text]
  • Compliance with Legal Minimum Wages and Overtime Pay Regulations in China Linxiang Ye1, TH Gindling2,3* and Shi Li2,4
    Ye et al. IZA Journal of Labor & Development (2015) 4:16 DOI 10.1186/s40175-015-0038-2 ORIGINAL ARTICLE Open Access Compliance with legal minimum wages and overtime pay regulations in China Linxiang Ye1, TH Gindling2,3* and Shi Li2,4 * Correspondence: gindling@umbc.edu Abstract 2IZA, Bonn, Germany 3Department of Economics, UMBC, We use a matched firm-employee data set to examine the extent of compliance 1000 Hilltop Circle, Baltimore, MD, with minimum wage and overtime pay regulations in Chinese formal sector firms. USA We find evidence that there is broad compliance with legal minimum wages in Full list of author information is available at the end of the article China; fewer than 3.5% of full-time workers earn less than the legal monthly minimum wage. On the other hand, we find evidence that there is substantial non-compliance with overtime pay regulations; almost 29% of the employees who work overtime are not paid any additional wage for overtime hours, and 70% are paid less than the legally-required 1.5 times the regular wage. JEL codes: J3, J8, O17 Keywords: China; Labor protection regulations; Minimum wages; Overtime pay; Compliance 1 Introduction In recent years, as the Chinese economy has become more market and export ori- ented, Chinese central and regional governments have actively intervened in the labor market in attempts to ensure that low wage workers benefit from the resulting rapid economic growth. A key intervention in the labor market has been legal minimum wages. In this paper we study minimum wages and two related labor market interven- tions to protect the pay of low wage workers in China: additional pay for overtime hours and legally-mandated wage supplements for dangerous work, night work, pen- sions and other social protections.
    [Show full text]
  • EMPLOYMENT and INEQUALITY OUTCOMES in CHINA Cai Fang
    EMPLOYMENT AND INEQUALITY OUTCOMES IN CHINA Cai Fang, Du Yang and Wang Meiyan Institute of Population and Labour Economics, Chinese Academy of Social Sciences TABLE OF CONTENTS INTRODUCTION ........................................................................................................................................... 4 1. INEQUALITY TRENDS IN CHINA ......................................................................................................... 5 2. LABOUR MARKET OUTCOMES, POVERTY AND INEQUALITY TRENDS: WHAT LINKS? ....... 9 2.1. The importance of incomes from labour ............................................................................................... 9 2.2. Poverty and inequality: measurement issues ...................................................................................... 11 2.3. The determinants of inequality ........................................................................................................... 17 3. THE ROLE OF LABOUR MARKET INSTITUTIONS, REGULATIONS AND POLICIES ................ 21 3.1. Strictness of the Employment Contract Law ...................................................................................... 22 3.2. Other new institutions on China’s labour markets .............................................................................. 24 3.3. Links between labour market institutions and inequality ................................................................... 30 4. THE ROLE OF SOCIAL ASSISTANCE PROGRAMMES AND THE PENSION SYSTEM ............... 34 4.1 The
    [Show full text]
  • Wages, Productivity and Labour Share in China1
    ILO Regional Office for Asia and the Pacific Regional Economic and Social Analysis Unit (RESA) Research Note | April 2016 Wages, productivity and labour share in China1 1. Substantial wage growth Figure 1. Real wage growth indices in G20 countries, 2008-13 (2008=100) Over the past two decades, wages in China have been rising steadily; this has accounted for much of the global wage 160 2 growth. The poverty ratio has also declined from 88 per 150 3 cent in 1981 to 11 per cent in 2010. In 2015, about 60 per 140 4 cent of Chinese workers were in the middle class. Rising 130 wages have thus contributed to reducing poverty and 120 expanding the middle class. 110 100 Growth in urban real wages 2008 2009 2010 2011 2012 2013 China (Urban) India Between 2008 and 2014, real wages in China’s urban units5 Indonesia G20 developing G20 grew at a compound annual rate of 9.1 per cent. For employees in urban private enterprises – where wages are Source: Estimates based on NBS: National Data; and ILO: Global Wage Database. considerably lower than in the public sector – the real wage growth was even faster, at 10.7 per cent per annum. In As a result of its rapid wage growth, China’s estimated nominal terms, the 2008 average monthly wage in China’s average nominal wage (in both urban units and private urban units was 2,408 Yuan Renminbi (CNY) – 69 per cent enterprises) was higher than the average wage levels of other higher than the average wage of CNY1,423 in urban private developing economies in Asia and the Pacific in 2014.
    [Show full text]
  • 0221 Effect of Minimum Wages on Employment in Emerging Economies
    THE EFFECT OF MINIMUM WAGES ON EMPLOYMENT IN EMERGING ECONOMIES: A LITERATURE REVIEW Stijn Broecke (OECD), Alessia Forti (OECD) and Marieke Vandeweyer (KU Leuven) Abstract The literature on the employment impact of minimum wages in emerging economies is scant, but growing rapidly. To date, virtually no attempt has been made to systematically review the existing evidence. Using both qualitative as well as quantitative (regression meta-analysis) methods, this paper reviews the evidence on the employment impact of increases in the minimum wage in ten major emerging economies (Brazil, Chile, China, Colombia, India, Indonesia, Mexico, the Russian Federation, South Africa and Turkey). Overall, increases in the minimum wage are found to have only a minimal (or no) impact on employment in emerging economies. While more vulnerable groups (the low-skilled, youth and low-wage earners) are slightly more likely to be negatively affected, these effects are quantitatively very small. The impact on formality is positive, but also extremely small. The paper does find evidence that more recent studies are more likely to find positive employment effects. There is also some indication that methodology and the type of data used might have an independent effect on the direction and significance of the minimum wage coefficient. Introduction Despite decades of research and hundreds of papers on the topic, the debate about the impact of minimum wages on employment in advanced economies is still raging. The recent exchanges in the United States between Dube et al. (2010), Allegretto et al. (2011), Allegretto et al. (2013), on the one hand, and Neumark et al. (2014; forthcoming), on the other, bear testimony to this fact.
    [Show full text]
  • The Eroding Hukou System and the New Minimum Wage in China: the Impacts of Economic Inequality, Labor Shortages and Social Unrest
    Trinity College Trinity College Digital Repository Senior Theses and Projects Student Scholarship Spring 2012 The Eroding Hukou System and the New Minimum Wage in China: The Impacts of Economic Inequality, Labor Shortages and Social Unrest Allison J. Selby Trinity College, allison.selby@trincoll.edu Follow this and additional works at: https://digitalrepository.trincoll.edu/theses Part of the Asian Studies Commons, and the Labor Economics Commons Recommended Citation Selby, Allison J., "The Eroding Hukou System and the New Minimum Wage in China: The Impacts of Economic Inequality, Labor Shortages and Social Unrest". Senior Theses, Trinity College, Hartford, CT 2012. Trinity College Digital Repository, https://digitalrepository.trincoll.edu/theses/176 The Eroding Hukou System and the New Minimum Wage in China: The Impacts of Economic Inequality, Labor Shortages and Social Unrest A thesis presented by Allison J. Selby to The Department of International Studies Directed by Dean Xiangming Chen Trinity College Hartford, Connecticut May 2, 2012 Abstract The hukou system, also known as the Household Registration System, has had a significant impact on China’s social, political, and economic trajectory since the time of its implementation in 1958. Specifically, it has helped to create the societal-wide imbalance between the prosperous coastal cities along the eastern seaboard and the lagging rural countryside of China’s interior provinces, where a second class group of citizens has emerged. As a result, the central government has strategically begun to increase the minimum wage nation-wide, as evidenced by the 12 th Five Year Plan. The repercussions of this are potentially enormous, not only for low-paid workers in China but also for world-wide consumers of Chinese products and competing producers.
    [Show full text]
  • A-570-053 Investigation Public Document E&C VI: MJH/TB MEMORANDUM FOR: Gary Taverman Deputy Assistant Secretary for Antid
    A-570-053 Investigation Public Document E&C VI: MJH/TB MEMORANDUM FOR: Gary Taverman Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations, performing the non-exclusive functions and duties of the Assistant Secretary for Enforcement and Compliance THROUGH: P. Lee Smith Deputy Assistant Secretary for Policy and Negotiations James Maeder Senior Director, performing the duties of the Deputy Assistant Secretary for AD/CVD Operations Robert Heilferty Acting Chief Counsel for Trade Enforcement and Compliance Albert Hsu Senior Economist, Office of Policy FROM: Leah Wils-Owens Office of Policy, Enforcement & Compliance DATE: October 26, 2017 SUBJECT: China’s Status as a Non-Market Economy Contents EXECUTIVE SUMMARY ............................................................................................................ 4 INTRODUCTION AND BACKGROUND ................................................................................... 8 SUMMARY OF COMMENTS FROM PARTIES......................................................................... 9 ANALYSIS ................................................................................................................................... 11 Factor One: The extent to which the currency of the foreign country is convertible into the currency of other countries. .......................................................................................................... 12 A. Framework of the Foreign Exchange Regime ................................................................ 12
    [Show full text]
  • The Institutional Features of Minimum Wage in Chinapdf
    ILO Brief: The Institutional Features of Minimum Wage in China Issue Brief December 2020 The Institutional Features of Minimum Wage in China The first national level regulatory instrument on minimum wage was introduced in 1993: “Provisions on Minimum Wages in Enterprises”. Key features are: o The province-level government is the authorized body to adjust and fix minimum wage o Frequency of minimum wage adjustment: “adjustment at most once a year” Minimum wage is recognized in a law: The Labour Law enacted in 1994 contains stipulation on minimum wage, elevating minimum wage policy into a law from administrative requirement o Article 48 “China implements the minimum wage guarantee system” Revision of the “implementation regulation” on minimum wage in 2004: revised Provisions on Minimum Wages came into effect in March 2004. The revised provision introduces a more comprehensive set of regulation to govern minimum wage. Key features of the revised regulation and the subsequent practice and institutional development include: o Clearer definition of minimum wage, as the statutory minimum to be enforced by law o Scope of application of minimum wage is clarified and expanded: o The minimum wage regulation, either at the national level or at the province level, clearly indicate that minimum wage is to be applied to full-time and non-full-time workers who have “labour relations” at an “enterprise”. The 2004 Provisions on Minimum Wage: [Article 2] The present Provisions shall apply to the enterprises, private non-enterprise entities, individual industrial and commercial households with employees (hereinafter collectively referred to as employing entities) and the labourers who have formed a labour relationship with those employing entities.
    [Show full text]
  • Employment and Working Ho ... China.Pdf
    Employment and Working Hours Effects of Minimum Wage Policy in China Master Thesis Hanbing Wang (4184858) Engineering and Policy Analysis Faculty of Technology Policy Management Delft University of Technology October 4th, 2013 Title Page Title Employment and Working Hours Effects of Minimum Wage Policy in China Author Hanbing Wang Date October 4th, 2013 Email ice19880108@gmail.com University Delft University of Technology Faculty of Technology, Policy & Management Program Engineering and Policy Analysis Section Economics of Innovation Graduation Committee Chairman: Alfred Kleinknecht [Economics of Innovation] First Supervisor: Servaas Storm [Economics of Innovation] Second Supervisor: Martin de Jong [Policy, Organisation, Law & Gaming] Acknowledgement This thesis is the final product of my two-year study that started in September 2011 and ended in October 2013 in the Engineering and Policy Analysis program at Faculty of Technology, Policy & Management, TU Delft. My most sincere gratitude goes to my graduation committee. I'd like to thank Dr. Servaas Storm who guided and helped me during the whole graduation process. I really appreciate that you helped me find the DIDs method which directly guide me to an in-depth research. I gained a lot from the efficient discussion each time as well. I also thank Prof. dr. Alfred Kleinknecht, you are always gentle and patient and ready to provide help. Dr. Martin de Jong, thank you for helping me revising my thesis so carefully, even with my careless spelling or grammar mistakes. The commends you marked in the draft are really useful to me. I also would like to thank Nan Wang, Kelei Jiang, Yingjun Deng and all my best friends.
    [Show full text]
  • Minimum Wages and Firm Employment: Evidence from China
    Minimum Wages and Firm Employment: Evidence from China Yi Huang Prakash Loungani Gewei Wang ¦ The Graduate Institute, IMF The Chinese University Geneva of Hong Kong September 2014 Abstract This paper provides the first systematic study of how minimum wage policies in China affect firm employment over the period 2001–07. Using a novel administrative dataset of minimum wage regulations across more than 2,800 counties matched with countrywide firm- level data, we investigate both the effect of the minimum wage and its regulation reform started from 2004. A dynamic panel estimator is combined with a neighbor-pairs approach to control for unobservable heterogeneity common to border counties. We show that minimum wage increases have a significant negative impact on employment on an annual basis, with an estimated employment elasticity of ¡0:116. By contrast, the employment response to minimum wage hikes was minuscule before 2004. In addition, we find a heterogeneous effect of the minimum wage on employment that depends on the firm’s wage level. Specifically, the minimum wage has a larger negative impact on employment in low-wage firms than in high-wage firms. We explore labor market competition as a potential explanation of this heterogeneity. Our results are robust for sample attrition checks and spillover tests. JEL classifications: J24; J31; 014, F10, F14 Keywords: China, Employment, Minimum Wages ¦ This is a revised version of an article previously circulated under the title Labor Market Shocks and Corporate Policies: Evidence from the Minimum-Wage Law Reform in China (IMF “Job & Growth” working group, November 2013). We thank Olivier Blanchard, Harald Hau, Elias Papaioannou, Richard Portes, Hélène Rey, and Qiren Zhou for invaluable guidance and generous support.
    [Show full text]
  • First Line of Title
    TWO ESSAYS ON THE CHINESE LABOR MARKET by Hao Liu A dissertation submitted to the Faculty of the University of Delaware in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Economics Summer 2018 © 2018 Hao Liu All Rights Reserved TWO ESSAYS ON THE CHINESE LABOR MARKET by Hao Liu Approved: __________________________________________________________ Michael A. Arnold, Ph.D. Chair of the Department of Economics Approved: __________________________________________________________ Bruce W. Weber, Ph.D. Dean of the Alfred Lerner College of Business and Economics Approved: __________________________________________________________ Ann L. Ardis, Ph.D. Senior Vice Provost for Graduate and Professional Education I certify that I have read this dissertation and that in my opinion it meets the academic and professional standard required by the University as a dissertation for the degree of Doctor of Philosophy. Signed: __________________________________________________________ Charles R. Link, Ph.D. Professor in charge of dissertation I certify that I have read this dissertation and that in my opinion it meets the academic and professional standard required by the University as a dissertation for the degree of Doctor of Philosophy. Signed: __________________________________________________________ Saul D. Hoffman, Ph.D. Member of dissertation committee I certify that I have read this dissertation and that in my opinion it meets the academic and professional standard required by the University as a dissertation for the degree of Doctor of Philosophy. Signed: __________________________________________________________ Evangelos M. Falaris, Ph.D. Member of dissertation committee I certify that I have read this dissertation and that in my opinion it meets the academic and professional standard required by the University as a dissertation for the degree of Doctor of Philosophy.
    [Show full text]
  • Impact of Minimum Wages on Employment: Evidence from China Jinlan Ni University of Nebraska at Omaha, Jni@Unomaha.Edu
    University of Nebraska at Omaha DigitalCommons@UNO Economics Faculty Publications Department of Economics 12-9-2014 Impact of Minimum Wages on Employment: Evidence from China Jinlan Ni University of Nebraska at Omaha, jni@unomaha.edu Guangxin Wang Zhejiang University of Science and Technology Xianguo Yao Zhejiang University Follow this and additional works at: https://digitalcommons.unomaha.edu/econrealestatefacpub Recommended Citation Ni, Jinlan; Wang, Guangxin; and Yao, Xianguo, "Impact of Minimum Wages on Employment: Evidence from China" (2014). Economics Faculty Publications. 43. https://digitalcommons.unomaha.edu/econrealestatefacpub/43 This Article is brought to you for free and open access by the Department of Economics at DigitalCommons@UNO. It has been accepted for inclusion in Economics Faculty Publications by an authorized administrator of DigitalCommons@UNO. For more information, please contact unodigitalcommons@unomaha.edu. The Impact of Minimum Wages on Employment: Evidence from China Jinlan Ni Department of Economics College of Business Administration University of Nebraska at Omaha Email: jni@mail.unomaha.edu Phone: (402)554-2549 Fax: (402)554-2853 Guangxin Wang School of Economics & Management Zhejiang University of Science & Technology Email: sunny20150@163.com Phone: 01186-133-360-92539 Xianguo Yao College of Public Administration Zhejiang University Email: cec_yaoxg@zju.edu.cn Phone: 01186-135-057-13268 Professor Xianguo Yao thanks the support from the Bureau of Education PRC (06JZD0014). Jinlan Ni is the corresponding author. Abstract This paper examines the impact of minimum wage on employment in China using data from 2000 to 2005. We find the mixed effects of the minimum wage on the employment levels. Overall, the minimum wages have no significant adverse effect on the employment.
    [Show full text]