Minimum wage and household economic vulnerability: Evidence from China

Abstract

Epidemic shocks have brought the issue of household economic vulnerability to the fore. Furthermore, an urgent need to establish a long-term mechanism to particularly help low-income groups cope with risk shocks, and minimum wage policies should be able to play an important role. Therefore, based on CHFS panel tracking data in 2015, 2017, and 2019, the impact of the minimum wage increase on household economic vulnerability and its mechanism of action is empirically tested. We found that for every 10% increase in the minimum wage, the probability of economic vulnerability occurring in the household economy decreases by 2.81 percentage points because the minimum wage increase raises the household income level of low-income groups, improves the health status of household members, and increase their commercial health insurance, emergency savings and financial capital stock. This impact is more significant for rural households, households in areas with high marketization levels, better rule of law levels and with low education levels. The article’s research helps to comprehensively analyse the welfare effects of minimum wage policies and expand the policy options for helping low-income groups cope with risk shocks.