Abstract

Using Chinese Household Income Project survey (CHIP) data, this study analyzes the impact of the Minimum Wage (MW) policy on average wage and wage distribution in urban China in the 1993-1995, the 1998-2002, and the 2007-2013 periods, and compared the MW effects between public and private sectors. Several major conclusions emerged from this study. First, comparatively, the overall impact of the MW on average wage in the 1993-1995 period is greater than the effect of the MW level on the average wage. Second, the MW effects on average wage exist in both the public and private sectors. However, holding the other factors consistent, the MW effect on average wage is greater for the private sector than for the public sector. Third, the overall effects of MW level on the low-wage group increased in the 2007-2013 period. Fourth, the effects of MW on wage distribution are greater for the private sector than for the public sector in the three periods. Holding the other factors consistent, the impact of MW on the low-wage group for the private sector increased greatly than for the public sector in the 2007-2013 period. Fifth, decomposition results indicated that the differences of distribution proportions, in regions with different MW levels between the public and private sectors helped reduce the wage gaps, as did the MW effects on wage, which were greater for the private sector than for the public sector in the 1993-1995 and 2007-2013 periods.

Highlights

  • The rationale behind the Minimum Wage (MW) policy is to increase the wage level for low-income group re-How to cite this paper: Ma, X. (2016)

  • Wage gaps between the public and private sectors exist in urban China even though the human capital of workers is consistent in these two sectors from 1993 to 2013

  • 2) The differences of the estimated coefficients of MW logarithmic values between the public and private sector for the low-wage group are greatest in the 2007-2013 period. These results showed that the effects of MW on wage distribution are greater for the private sector than for the public sector in the three periods, the effect of MW on the low-wage group has increased in the 2007-2013 period

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Summary

Introduction

The rationale behind the Minimum Wage (MW) policy is to increase the wage level for low-income group re-How to cite this paper: Ma, X. (2016). The rationale behind the Minimum Wage (MW) policy is to increase the wage level for low-income group re-. Impacts of Minimum Wage Policy on Wage Distributions in Urban China: Comparison between Public and Private Sectors. Ma duce their poverty level and narrow income inequality between high- and low-wage groups. In China, income inequality increased during the economic transition period. Along with marketization reform progress, the Chinese government implemented the MW policy. This policy addressed “market failure” caused by firms that set lower than equilibrium wages. In 2004, the government published a new MW regulation to enforce the implementation of MW policy in whole of China; there was a large increase in MW level since 2004

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