The Effect of Minimum Wage Increase on Employment in China

For a country with huge population such as China, employment never stops being one of the crucial tasks of the government nor a hot issue to the public. This paper investigates one of the most controversial policies which is related to employment, the minimum wage policy, to explore its effects on employment. Even though this issue has been well researched by several Chinese scholars, no consensus has been reached due to the diversities in selections of target groups and regions. Therefore, the paper adopts propensity score matching method to quantitatively investigate the employment effects of minimum wage increase in China based on Chinese General Social Survey (CGSS) 2013 data with the aim to testify the consistency of the findings of previous studies. Through the analyses, statistically significant results were captured in Shanxi and Anhui Provinces. However, since the date of minimum wage adjustment of Anhui fails to meet the selection criteria, only results from Shanxi case are regarded to be qualified. Therefore, the result based on central China shows that minimum wage increase indeed generates statistically significant and negative effects on employment (20% in Shanxi case). Since no western provinces satisfy the selection criteria, the paper is unable to generate valid results of western China, which leaves the employment effect of minimum wage increase in that area to be unclear.