Impact of Minimum Wages on Employment: Evidence from China

This article examines the impact of the minimum wage on employment in China using data from 2000 to 2005. The effect of the minimum wage on employment levels was found to be mixed. Overall, minimum wages have no significantly adverse effect on employment. In particular, the results in the eastern region of China indicate few significant negative effects, which is consistent with the minimum wage theory in the competitive market. In contrast, the central and western regions experience few significantly positive effects, which is consistent with the theory in the monopsony model. The results are robust regardless of ownership (non-state-owned enterprises, collectives, private enterprises, and other types), industry type (manufacturing, wholesale and retail trade, hotel and restaurant), and gender of workers. Low real minimum wages, weak enforcement capabilities, and the buyer\u27s labor market—the three factors that may account for the effects of minimum wages on employment in China—are analyzed