The Impact of Minimum Wage Policies on Income Inequality: Evidence from China

Abstract

This paper examines the impact of China's minimum wage policy on income inequality. By analysing micro-survey data from China's urban labour market, this study uses microeconometric methods to assess the level and implementation of the minimum wage and its multiple impacts on the employment effect, the labour supply effect, the spillover effect, the inequality effect and the income distribution effect. It was found that the minimum wage policy, while raising the wage level of low-income groups, had a significant negative impact on the income of workers whose income levels fell within the 150 per cent to 250 per cent range of the previous period's minimum wage, suggesting that the minimum wage policy did not have a uniform effect in reducing the income gap.