Impact of corporate employment: Minimum wage or social insurance policy? Evidence from China

Junpeng Di, Wanhe Li and Mingyuan Zhang

Journal of Asian Economics, 2025, vol. 100, issue C

Abstract: China has steadily increased minimum wage standards and enforcement, and scholars have widely demonstrated that higher minimum wages raise enterprise labor costs and significantly affect employment. However, research has largely overlooked social insurance contributions, which are an equally substantial cost burden for Chinese firms. This study examines both policies simultaneously, developing a theoretical framework to analyze how minimum wage and social insurance policies jointly influence labor market outcomes, and using National Tax Survey data from 2007 to 2016 combined with comprehensive regional minimum wage data. Our empirical findings reveal that minimum wage increases significantly reduce enterprise employment when social insurance costs are held constant, but social insurance policy adjustments can offset these negative employment effects when both policies are implemented simultaneously. These effects vary across enterprise ownership types, industries, and regions. The results suggest that policymakers should coordinate minimum wage and social insurance instruments rather than implementing them in isolation as a pathway to protect workers’ living standards while minimizing adverse effects on enterprise employment and competitiveness.

Keywords: Minimum wage; Social insurance policy; Policy coordination; Employment (search for similar items in EconPapers)
JEL-codes: J38 J65 M51 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:100:y:2025:i:c:s1049007825001393

DOI: 10.1016/j.asieco.2025.102015

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