Working Paper No. 37, Shi Li, XinXin Ma: Impact of Minimum Wage on Gender Wage Gaps in Urban China
Li, Shi; Ma, Xinxin
Published: 2015/11/7 15:17:02    Updated time: 2015/11/7 15:17:02
Abstract: This paper provides evidence on whether the minimum wage (MW) has affected gender wage gaps in urban China. Several major conclusions emerge. First, from 1995 to 2007, the proportion of workers whose wages were below the regional MW level was greater for female workers than for male workers. Second, the results obtained by using the difference-in-differences estimation method show that from a long-term perspective, the MW will help to reduce gender wage differentials and that the effect is more obvious for the low-wage group. However, in the short term, the amelioration effect is not obvious.
Keywords: minimum wage; gender wage gap; urban China


        Li, Shi ---- China Institute for Income Distribution, BNU;

        Ma, Xinxin ---- Kyoto University, Japan


1 Introduction

Does the minimum wage (MW) policy that has been enforced since 1993 affect gender wage differentials in China? In this paper, we provide evidence on this issue. The significant points of the study are the following.

First, as is well known, along with the progress of economic reform, an increase in income inequality has become a serious social problem that should concern the government. In fact, there have been many studies on the issue, such as those of Zhao, Li and Riskin (1996), Li and Gustafsson (2008), and Li, Sato and Sicular (2013). Because wages represent the largest share of the incomes of urban residents, a study on wage gaps is undoubtedly of great significance to investigate the causes of income inequality. Currently, there is a variety of forms of wage gaps in China. From among them, the gender wage gap has risen to prominence along with institutional transition.

Gender wage gap has become an issue primarily for two reasons: the  widening gender wage gap is a factor contributing to the widening income gap and the reverse phenomenon arising with institutional reform and economic development. Specifically, the gender wage gap was small during the period of planned economy because the government focused more on gender equality and positively carried out a number of policies to promote female employment and gender equality; thus, the wage distribution was relatively equal (Gustafsson and Li 2000). Conversely, the economic transition has had an indirect effect on the expansion of the gender wage gap. For example, during the employment adjustment of SOEs, the probability of becoming unemployed is greater for females than for males, and there is a gender wage gap among re-employed workers, primarily because of the discrimination against females (Li and Gustafsson 2008; Ma 2008). In addition, because the gender wage gap of the non-state owned sector is larger than that of SOEs (Ma 2009), the ownership reform promoted the rapid development of the non-state owned sector but also resulted in an increased gender wage gap. Furthermore, unlike in Europe, Japan and other developed countries, the change trend of the gender wage gap, which is from small to large, is a reversal phenomenon accompanying economic development. Actually, it can be considered a quasinatural experimental model for a study on changes in policy and gender wage gap. Thus, from both social policy and academic perspectives, the gender wage gap in urban China is an important issue.

Second, to improve the efficiency of the implementation of public policies in various economic fields, policy evaluation has become a very important practice in recent decades. During the economy transition period, the Chinese government introduced a number of new policies and regulations addressing gender gap in employment and wages. Gender equality may be explicitly stipulated in such new regulations. Nevertheless, there is no empirical study to prove whether those policies have narrowed the gender wage gap. This paper is aimed at discussing the effects of the MW policy on gender wage gap.

We focus on the MW policy for the following two reasons. First, the implementation of the MW, in theory, may increase the income of low-wage workers and is beneficial to reduce poverty. Therefore, the MW is enacted as an important labor policy. To examine the policy effect, many empirical analyses have been conducted in other countries. In contrast, although the MW has been in effect since 1993 in China, empirical analysis of it using microdata is rare. Second, the effects of the MW on gender wage gap depend on many factors. Some of these factors include, for example, the gender gap in the proportion of workers whose wages are below the regional MW level and the gender gap between actual wages and the MW level before the implementation of the MW (Robinson 2002, 2005). Therefore, although the implementation of the MW does not imply a reduction of gender wage gap in theory, we need to verify its effects through an empirical analysis.

This paper attempts to answer the following questions through an empirical analysis using micro-data from CHIP1995, CHIP2002 and CHIP2007. First, is the proportion of the population with wages below the MW level greater for males than for females? Is the gap between actual wages and the MW level greater for females than for males? Second, would different MW levels adopted in various regions lead to a regional difference in gender wage gap? Third, does the MW system affect gender wage gap? What are the effects of endowment differentials? What are the effects of endowment return differentials? Fourth, has the MW system, which was implemented in 1993, affected the gender wage gap? If it has, is there a difference in short-term and long-term effects? Because we use the cross-sectional micro survey data from three periods, a repeated cross-section analysis should also investigate the changes (if any) in the abovementioned issues along with policy changes. Considering that the MW primarily affects low-income groups, we employ different models to conduct the analysis on average wages and wage distribution.

This paper is structured as follows. Part II reviews the literature. Part III describes analysis methods, including introduction to data and models. Part IV answer the first question presented above using statistical description results. Part V states the quantitative analysis results to answer the second, third and fourth questions. Part VI presents the main conclusions.



 - Working Paper No. 37
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