The Effects of the Minimum Wage on Earnings Inequality: Evidence from China

초록

The minimum wage has been regarded as an important element of public policy for reducing poverty and inequality. Increasing the minimum wage is supposed to raise earnings for millions of low-wage workers and therefore lower earnings inequality. However, there is no consensus in the existing literature from industrialized countries regarding whether increasing the minimum wage has helped lower earnings inequality. Studying the effect of the minimum wage on the earnings distribution is more complicated in developing countries such as China than in industrialized countries owing to the presence of large informal sectors in urban areas, large pools of surplus labor in rural areas, and difficulties in ensuring compliance with minimum wage legislation. China has recently exhibited rapid economic growth and widening earnings inequality. Since China promulgated new minimum wage regulations in 2004, the magnitude and frequency of changes in the minimum wage have been substantial, both over time and across jurisdictions. The growing importance of research on the relationship between the minimum wage and earnings inequality and its controversial nature have sparked heated debate in China, highlighting the importance of rigorous research to inform evidence-based policymaking. The authors investigate the contribution of the minimum wage to the well-documented rise in earnings inequality in China over the period from 2004 to 2009 by using city-level minimum wage panel data and a representative Chinese household survey, and find that increasing the minimum wage exerts beneficial effects on the earnings distribution-by reducing the earnings gap between the median and the bottom decile-over the analysis period. © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2020.