Impacts of Minimum Wage Policy on Wage Distributions in Urban China: Comparison between Public and Private Sectors

Abstract

Using Chinese Household Income Project survey (CHIP) data, this study analyzes the impact of the Minimum Wage (MW) policy on average wage and wage distribution in urban China in the 1993-1995, the 1998-2002, and the 2007-2013 periods, and compared the MW effects between public and private sectors. Several major conclusions emerged from this study. First, comparatively, the overall impact of the MW on average wage in the 1993-1995 period is greater than the effect of the MW level on the average wage. Second, the MW effects on average wage exist in both the public and private sectors. However, holding the other factors consistent, the MW effect on average wage is greater for the private sector than for the public sector. Third, the overall effects of MW level on the low-wage group increased in the 2007-2013 period. Fourth, the effects of MW on wage distribution are greater for the private sector than for the public sector in the three periods. Holding the other factors consistent, the impact of MW on the low-wage group for the private sector increased greatly than for the public sector in the 2007-2013 period. Fifth, decomposition results indicated that the differences of distribution proportions, in regions with different MW levels between the public and private sectors helped reduce the wage gaps, as did the MW effects on wage, which were greater for the private sector than for the public sector in the 1993-1995 and 2007-2013 periods.