Abstract
With the government setting stricter standard on carbon emission, enterprises are facing more environmental pressure and cost these years. At the same time, China’s State Council has officially announced a further reducing the social security contribution rate from May 1, 2019, it is worthy of assessing that if the reduction would decompress enterprises and promote labor demand. Our results shows that social security contribution rate does not have significantly impacts on enterprises’ labor demand overall. However, when wage and benefit are controlled, it has a direct impact on labor demand. Basic regression and heterogeneity analysis both confirm it. Wage and benefit play intermediary roles as the results show. Social security contribution rate has negatively impact on wage and benefit, which help to keep the total labor remuneration and then labor demand unchanged. State-owned and private enterprises show similar results. However, laborintensive and non-labor-intensive enterprises show slightly different results.
Highlights
Chinese statutory social security contribution rate of enterprises has been as high as about 30% since the establishment of the social security system
Compared with the average level of OECD countries, China's social security contribution rate is far high, which has become a massive burden to enterprises, especially private ones[1][2][3][4], and leads to the contributions avoidance[5][6][7]
We may conclude that social security contribution rate does not have direct impacts on labor demand and the indirect impacts need to be further studied
Summary
Chinese statutory social security contribution rate of enterprises has been as high as about 30% since the establishment of the social security system. Global warming has become one of the top topics all over the world. Chinese government have paid much efforts to achieve carbon neutral and enterprises are confronted with more economic burden in the past decade. Economic growth is decreasing and social security contributions seem more cumbersome to enterprises, and they call for a reduction. The enterprises will change their decisions on labor demand and further reduce costs by cutting the number of employees[10][11] (Beach & Balfour, 1983; Lai & Masters, 2005; Li & Wu, 2011). Our paper focuses on this topic and try to answer the question
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