A Comparative Study of Minimum Wage and Employment in China and in the United States

Main Article Content

Jianfeng Yao
Duanxiang Fu

Abstract

In this paper, we use regression models to analyze and compare the effect of a change in real minimum wage on employment rate both in China (the largest emerging market) and in the United States (the largest developed country). The longitudinal data we use is from 2000 to 2016 published by both countries. After controlling for unobserved heterogeneities by using the fixed effect estimations, the results show a significant and negative correlation between real minimum wage and employment rate in both countries, with a smaller and weaker effect of real minimum wage in China. It indicates that employment in China is less responsive to a change in minimum wage because of its unique economic system. In addition, We find that the effect of minimum wage on employment rate turns into insignificant in recent years in China since 2008, which is the opposite of and different from the situation in the U.S.

Article Details

Section
Articles

References

Abowd J.M., Kramarz F., Margolis D.N., Philippon. (2000). The Tail of Two Countries: Minimum wages and employment in France and the United States. IZA Discussion Paper No. 203.
Bureau of Labor Statistics, United Sates Department of Labor.
Bureau of Population and Employment Statistics of the National Bureau of Statistics. China Labor Statistical Yearbook (2004-2016).
Fabián Slonimczyk, Peter Skott. (2012). “Employment and Distribution Effects of the Minimum Wage.” Journal of Economic Behavior & Organization, 84(1): 245–264.
Jiao D. (2014). Minimum wage in foreign counties. Beijing: China labor and social security press.
Kalenkoski, Charlene M, Lacombe, Donald J. (2013). “Minimum Wages and Teen Employment: A Spatial Panel Approach.” Papers in Regional Science, 92 (2): 407-417.
Labor Department. (1993). Minimum Wage Regulations for Enterprises.
Neumark D, W Wascher. (1992). “Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws.” Industrial and Labor Relations Review, 46(1): 155-181.
Sabia, Joseph. (2014). “The Effects of Minimum Wages Over the Business Cycle.” Journal of Labor Research, 35(3): 227-245.
United States Congress. Fair Labor Standards Act. 1938.
Wang GX, Yao XG. (2014). “The Impact of Minimum Wage on Employment in China.” Economic Theory and Business Management, 11:16-30.
Wu, Y. (2014). The Empirical Study of China’s Minimum Wage Employment Effect. Hangzhou: Zhejiang University of Finance and Economics.
Yuan LP, Li GF. (2007). “The Impact of Minimum Wage System on Unemployment Rate in China’s Labor Market.” Journal of Hunan Financial and Economic College, 23(109):126-128.