Minimum Wages,Cost-Price Pass-Through and Real Welfare Effect of Households

The minimum wage policy should take into account production costs of enterprises and welfare benefits of families.This paper describes the pass-through process of the minimum wage costs in the enterprise sector and the household sector by building a theoretical model,investigates the impact of the minimum wage adjustment on urban household consumption utility and its price pass-through mechanism from the perspective of living costs based on several sets of databases,such as household survey,supermarket prices and industrial enterprises for the first time,and further estimates the net welfare changes including income compensation and consumption utility loss.The findings of the study are as below:(1)The price transfer behavior of enterprises is the main cause of the loss of household consumption utility.The average wage level and labor costs of enterprises rise with the increase of minimum wages.Both the cost-price pass-through elasticity estimated based on the theoretical model and the minimum wage price elasticity coefficient obtained by empirical estimation show that the price transfer behavior of enterprises leads to the rise of final consumer prices;(2)With a 10% increase in minimum wages,the overall household living costs increase by 2.47%-6.76%,and the economic living costs increase by about 122-334 yuan per quarter,among which the living costs are most affected in terms of food,shoes and clothing;(3)Under the combined effect of income compensation and consumption utility loss,the bottom 20% of households and middle 60% of households will get 658 yuan and 469-556 yuan per quarter,respectively.The findings of this paper are conducive to improving the supporting minimum wage policy by taking a number of measures simultaneously,so as to provide a path reference for promoting the realization of Chinese modernization and expanding domestic demand for common prosperity for all.

What Drives Chinese Firms'Export Sophistication?A Perspective from the Rise of Minimum Wages

This paper re-examines the driving factors behind the upgrading of China s export sophistication.Based on county-level minimum wages and firm-level export data for 2000-2013,this paper finds that the labor cost shocks caused by rising minimum wages have a significant positive impact on Chinese firms'export sophistication.Channel tests show that the positive effect of rising minimum wages on firms'export sophistication derives from the exit of less sophisticated products and the reallocation of the relative share of surviving products,rather than introducing new highly sophisticated products.Heterogeneity analysis reveals that rising minimum wages have a greater impact on export sophistication for low-wage firms,domestic firms,and labor-intensive firms.This paper has implications for developing countries regarding the transition from a low-cost labor trade model to a sophistication-driven trade model.

Indonesia’s Cheap Wages Regime:The Political Economy of Minimum Wages Policy under Jokowi Presidency

Indonesia’s new wage policy mechanism made a new history since Joko Widodo(Jokowi)became President.The first minimum wages policy in Indonesia was implemented in 1969 in which the determination comes from society^monthly necessities through a discussion involving labor,employer,and state,it is known that the determination is no longer using aforementioned variables but it is rather based on a market-standard formula.This paper exploring the logic political-economic of wage policies implementation based on neoliberalism in the first presidency of Jokowi,which has implications for affirming cheap wages policies.This research uses a qualitative method by comparing two regions with different economic bases,namely Bekasi as the largest industrial area in Southeast Asia and Yog-yakarta as the province with the highest national economy inequality and the cheapest national minimum wage representation.The findings of this research show that this new wage formulation is emerged from the ideology of corporatism that takes place in every power transfer process and has the implication of reinforcing wage inequality that occurs in the local context in Indonesia.Politically,this regulation eliminates the democratic mechanism in the form of tripartite through a survey of monthly necessities which is carried out by labor,government and employer every year and has divided the strength of trade unions in fighting for the determination of decent wages.

Effects of Minimum Wage Hikes on the Formalization of Employment

Despite the intention of minimum wage policy to maintain the living standards of low-income groups in the formal sector, this paper has found that the actual result of this policy produces the ＂big push＂ impact on China＇s economy under certain conditions, i.e. it is conducive to achieving the equilibrium of high wage, high consumption and formalization. The result shows that the elasticity of income growth from raising the minimum wage standard is greater for formal sector employees than for informal sector employees and is characterized by a U-shaped pattern in terms of quantiles. Thus, minimum wage hikes have widened wage gaps between and within sectors. Rising minimum wage standards greatly stimulate consumption with each 10% increase expected to bring about an additional urban household consumption of about 1.167 billion yuan in the surveyed four provinces. With local minimum wage hikes, the formal sector of wholesale and retail, hotel and catering services expands and the informal sector contracts, while the real estate sector experiences a ＂reverse formalization＂ trend. Based on the ＂big push theory＂, this paper concludes that against the backdrop of extensive, frequent and substantial minimum wage hikes, demand and sector TFP growth are the major causes of sector heterogeneity.

Estimating the Relative Level of Minimum Wage in China

It is generally believed in existing literature that China＇s minimum wage is too low and must be raised substantially. Such a view is highly misleading given the inconsistent statistical standards for minimum and average wages. In order to ensure comparability, this paper has adjusted the statistical scope for minimum and average wages respectively. If employees of urban private and self-employed businesses are included in calculating the average wage, the minimum-to-average wage ratio will increase by about 0.06; if the minimum wage standards of various localities include personal contributions to social insurance and the housing fund, the minimum-to-average wage ratio will increase by 0.008; if overtime pay is deducted from the average wage, the minimum-to-average wage ratio will further increase by around O. 06.In addition, if the median wage is used in place of the average wage, the minimum-to-average wage ratio will increase by at least 0.08. After these adjustments, China＇s minimum-to-average wage ratio for 2013 will increase from 0.28 to 0.49, which is within the range of between 0.40 and 0.60 that is recognized internationally as reasonable. Our analysis suggests that as far as the immediate interests of workers are concerned, it is more imperative to unify the statistical approaches for minimum and average wages in China than to raise the minimum wage standard. In order to achieve the expected effect, simply raising the minimum wage alone is not enough. What is also necessary is to enhance supervision and inspection on compliance by firms with the minimum wage policy, particularly the overtime pay regulations. An alternative is to replace monthly minimum wage with hourly minimum wage.

Analyzing the Impacts of Minimum Wage Standards on Reducing the Working Poor in China

During the past decades, the transformation of the labor market has significantly impacted on workers＇ wage structures and their employment in China. Along with the widening wage gaps and the growing income inequalities, the size of non-standard jobs expanded rapidly in China＇s urban labor market. As a result of this, the concept of working poor has become increasingly applicable to social and labor market realities in China, Based on the household survey data and by using quantitative analysis, this paper attempts to examine the interaction between the compulsory minimum wage standards and the working poor in the period of China＇s economic transition. The results show that for those whose monthly wages higher than the compulsory minimum wage standards were less likely to work poor and that workers with wages lower than the minimum wage floor were vulnerable to working poor, which supported the expectation that the implementation of compulsory minimum wages would help to reduce the risk of being a member among the working poor in China＇s urban labor market.

Effects of Changing Relative Value of Mininimum Wages on Wage Distribution in China:Analysis Based on County-Level Data

On the basis of extending Lee's(1999) model, this paper resolves the problem of biased division in the specification of equation and employs Urban Household Survey(UHS) data,China Household Income Project(CHIP) data and county-level minimum wage data collected by authors to investigate the wage distribution effects of change in the effective minimum wages measured by relative value. The result shows that the effective minimum wage will exert a significant spillover effect on wage distribution at the40 th percentile and below, which is favorable to reducing wage gaps at the bottom. This conclusion holds true under various robustness tests. However, the shrinking effective minimum wage has created a downward drag on wages, thus widening wage gaps at the bottom. The shrinking effective minimum wage contributed 150%,53.8%,45.5% and16.7% to the wage gaps at the 10 th, 20 th, 30 th and 40 th percentiles compared with the 50 th percentile. Therefore, the key to ensuring the effectiveness of minimum wages lies in the implementation of an automatic adjustment mechanism correlated with macroeconomic indicators. Compliance with minimum wages must be guaranteed and change in minimum wages must be measured with relative value.

Minimum Wage Standard in China

On July 1st,at least six Chinese provinces and cities would raise the minimum wages from today.In 2010,each province and city in China has begun to increase the lowest monthly salary for employers.

The Determinants of China's Minimum Wage Rates

We use a highly disaggregated panel of macro data and minimum wages at the county level to investigate the processes behind minimum wage adjustments in China.Relying on random effects models,spatial econometrics techniques,and multilevel analyses,we document that a comparatively small number of economic variables-including the local price level and GDP per capita-are important determinants of minimum wage rates.Interactions between adjacent counties and counties of the same administrative type,and centralized mechanisms,particularly at the provincial level,also play an important role in explaining the variance in minimum wage rates across counties.Finally,we show that China's provinces are the key players for setting minimum wage rates and that,when they do so,they are not uniform in the way they weigh different economic variables.

Minimum Wage Regulation in China and Its Applications to Migrant Workers in the Urban Labor Market

Using data at micro and city levels, the present paper explores the policy evolution of the minimum wage system in China, and examines its coverage for migrant workers. The analysis indicates that minimum wage policy has been substantially improved in terms of both coverage and the level of the minimum wage standard, but that the current policy tool that relies on the monthly wage rate is not effective. Because migrant workers tend to work more hours, use of an hourly wage rate is more appropriate than a monthly wage rate.

Employment and Working Hour Effects of Minimum Wage Increase:Evidence from China

Using a difference-in-differences model, the present paper provides empirical evidence of minimum wage effects on employment and working hours in China. The results show that male employment is not affected by a minimum wage increase, although men ＂s working hours do increase. In contrast, female employment is more likely to be negatively affected by a minimum wage increase, while their working hours remain unchanged. This may lead to women being in a more disadvantaged position in the workforee, and adopting a monthly minimum wage may induce firms to extend men＇s working hours. Therefore, to better protect disadvantaged workers, we suggest that minimum wage regulation should focus on the target group of less-educated women, and that a unified minimum hourly wage needs to be set for both full-time and part-time workers. Meanwhile, the importance of human capital accumulation shouM be addressed in alleviating the negative effects of minimum wage increases.

Employment Effects of Minimum Wage Regulation and Cross Effect of the Employment Contracts Law

Non-linear programming analysis suggests that employment effects of minimum wage regulation are the result not only of the regulation itself but also of the external regulatory environment. At a certain level, the regulatory environment intensifies the effect on employment of minimum wage regulation. Empirical studies based on survey data from 439 enterprises in Guangdong and Fujian show that minimum wage rises had a greater impact on the employment of rural migrant workers in 2008 than in 2007, although no significant change was observed among workers who were permanent urban residents. Further analysis shows that the greater impact on migrant workers derives mainly from the strengthened regulatory environment brought about by the Employment Contracts Law. The permanent urban workforce has not been similarly affected because their interests have been given priority under the dual employment system. This reminds us that the employment effects of the Employment Contracts Law may be realized indirectly through other regulatory measures, including strengthened minimum wage regulation.

Estimating the effect of minimum wage on firm profitability in China

Using the firm-level panel datasets and hand-collected data on county level minimum wage,this paper estimates the effect of minimum wage on firm profitability.As firms may take time to adjust in response to changes in minimum wage,this paper estimates a dynamic panel model with lagged minimum wage.To capture the heterogeneous effect of minimum wage on profitability,this paper further estimates quantile regression dynamic panel model.The estimation results suggest that the effect on firm profitability of minimum wage in the current year is negative across the whole conditional distribution of profitability and it exhibits an inverted-U shape across conditional quantiles.The effect on profitability of lagged minimum wage is positive at the 5th,10th,15th quantiles,negative at the 90th and 95th quantiles,and not significant at other quantiles.Turning to the overall effect on profitability of minimum wage,we find that minimum wage exerts significantly negative effect on profitability at the 5th quantile and quantiles higher than 40th and the absolute value of the effect of minimum wage increases with these quantiles.For other quantiles,the overall effect of minimum wage on profitability is negligible.

Will Freezing the Minimum Wage Help?

Plagued by the recent global financial turmoil,some Chinese enterprises,particu-larly labor-intensive small and medium-sized ones,are in difficulty,and this