[Working Paper No.12]Tony Fang&Carl Lin: Minimum Wages and Employment in China
Fang, Tony; Lin, Carl
Published: 2014/2/10 17:31:34    Updated time: 2015/8/7 19:44:36
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


    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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