Does raising the minimum wage matter to firms' energy transition?

Abstract

Environmental issues are closely related to the economic development of human society, and reducing environmental pollution during production is of great significance for environmental protection. This paper utilizes data from Chinese industrial enterprises (2001–2010), and establishes a fixed effects model to examine whether minimum wage standards are important in reducing non-clean energy consumption by enterprises. The results indicate that an increase in the monthly minimum wage leads to a significant reduction in coal consumption by firms, while the change in the hourly minimum wage do not exert a statistically significant influence on coal consumption by firms. The above empirical results remain robust after conducting a series of endogeneity tests. The mechanism test shows that innovation and exports serve as mediating variables between the minimum wage and coal consumption. Specifically, raising the minimum wage can incentivize enterprises to innovate in production and expand their exports, resulting in a decrease in the consumption of non-clean energy. Finally, through the heterogeneity test, we observe that increases in the minimum wage have varying effects on coal consumption among firms with different numbers of employees and different ages. Based on the research findings of this paper, we propose that the government should comprehensively consider and improve relevant systems, formulate scientifically-based minimum wage standards, take into account both workers' rights and interests as well as enterprises' profits, actively promote energy transformation in enterprises, and ultimately achieve long-term development of the social environment.