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Minimum wage regulation has generated heated discussions in
the public and academic communities. To better inform policy
discussions in mainland China and Hong Kong, HKUST IEMS held
a one-day workshop with leading researchers and experts to
share their most recent research findings and discuss the policy
implications.
The opening session featured three keynote speeches.
David
Neumark
from the University of California-Irvine, one of the
world’s leading authorities on minimum wage policies, began
the workshop with a talk on “Policy Levers to Increase Jobs and
Income from Work after the Great Recession”. Examining policies
implemented in the U.S. after the Great Recession to increase
jobs and incomes, Prof. Neumark examined the labor market
and welfare impacts of different policy levers, including minimum
wages, hiring credits, and the earned income tax credit (EITC).
He took a strong stand on the negative employment effects of
minimum wage—especially among young adults and less-skilled
workers—pointing out the targeting inefficiency of minimum
wages in reducing poverty. Hiring credits and the EITC, however,
were found to be useful instruments in achieving job creation
and poverty reduction. According to his research, hiring credits
were found to be effective, at least during economic downturns,
when the policy specifically targeted the unemployed and was
implemented with low administrative costs. EITC also has proven to
be effective in increasing employment and raising family incomes
as it avoids job loss and does a good job targeting low-income
families.
John Addison
from the University of South Carolina presented
his research “On the Robustness of Minimum Wage Effects:
Geographically-disparate Trends and Job Growth Equations”. He
addressed methodological concerns about estimating impacts of
changes in the minimum wage in different regions when such
changes are associated with spatial differences in the underlying
growth prospects for low-wage employment. Controlling directly
for this factor, he found insignificant minimum wage effects on
employment in the U.S. bar-and-restaurant sector.
Shi Li
from Beijing Normal University provided an overview
of minimum wage regulations in China in his presentation
“Understanding Impacts of Minimum Wage Policy on Labor Market
in China”. He argued that the mixed findings from the recent
literature on the labor market impacts of minimum wages in China
may be attributable to the slow increase in minimum wages and
the loose implementation of minimum wage policy prior to 2004.
Using new enterprise-employee matched data collected in 2009
and 2011, he found evidence of a significant positive impact of
minimum wages on wage growth and a negative impact on firm
profits.
The afternoon session concentrated on the employment effects of
minimum wages in China. The studies presented at the workshop
found significant disemployment effects of minimum wage
increases.
Carl Lin
from Beijing Normal University analyzed
urban household survey data and county-level data on minimum
wages from 2004 and 2009, and found the overall employment
WORKSHOP ON MINIMUMWAGES AND EMPLOYMENT IN CHINA, HONG KONG,
AND THE WORLD
(2014.09.12)
Video recordings of the presentations and
the related papers are available at
elasticity to be negative for young adults but with geographical
heterogeneity. The disemployment effects were most prominent
in Eastern and Central China, with little significance in the less-
developed West.
Gewei Wang
from The Chinese University of
Hong Kong presented similar results using firm-level data from
2005-2007. Adopting a “neighbor-pairs" approach comparing
employment changes in adjacent regions with different changes in
the minimum wage, he estimated the employment elasticity to be
-0.103, and found that the strengthened enforcement of minimum
wages in 2004 amplified the negative effect.
As in many other developing countries, policy compliance has
always been a key challenge.
Lingxiang Ye
of Nanjing University
of Finance and Economics tackled this issue by analyzing the
matched firm-employee dataset, with results showing broad
minimum wage compliance in China after 2004 in the sense that
very few full-time workers earned less than the monthly minimum
wage. However, the study also found substantial violations of
overtime pay regulations. Moreover, firms most likely to violate
overtime pay laws are disproportionately export-oriented,
domestically-owned private sector firms, firms with owners from
Hong Kong, Taiwan, and Macao, and firms located in Guangdong
and Shanxi provinces.
Siu Fai Leung
, Professor of Economics at HKUST and a member of
Hong Kong’s Minimum Wage Commission, provided an informative
update on minimum wage regulations in Hong Kong, and
Albert
Park
, Director of HKUST IEMS, provided an update on the situation
in other major emerging markets.
The highlight of the workshop featured a panel session on policy
lessons from research on minimum wages.
Wing Suen
from
the University of Hong Kong expressed his opinions on minimum
wage research and its connection to policy making. He pointed
out that there are many issues neglected by academic research
which are of great concern to policy makers. As a reference wage,
increases in minimum wages may push up the wages of higher-
income occupations, and thereby lead to distributional changes
at all wage levels. It might also result in labor force reallocation,
especially in the low-end service sector, if the law affects some
occupations more than others. Minimum wage increases can also
lead to higher prices for goods and services produced by low-wage
workers which can increase living costs for poor and rich alike.
Both Prof. Neumark and Prof. Addison agreed that minimum wage
compliance is an important issue and needed to be accounted for
in empirical research. Above all, policy makers should think about
who should be affected and who will be affected by minimum
wage policy adjustments, and ensure that such policies are well-
targeted.
