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Compliance with Legal Minimum Wages in China-------Using a Matched Firm-Employee Data Set
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TitleCompliance with Legal Minimum Wages in China-------Using a Matched Firm-Employee Data Set  
AuthorYe Linxiang, Gindling T.H., Li Shi and Xiong Liang  
OrganizationNanjing University of Finance and Economics,University of Maryland Baltimore County,Beijing Normal University;;; 
Key WordsMinimum wages; Overtime pay; Compliance 
AbstractWe use a matched firm-employee data set of year 2009 from six provinces to examine the extent to which minimum wage policy is complied with. We find evidence that there is broad compliance with the monthly minimum wage in China. That is, compared to other developing countries we only find 2.1%-3.4% of workers earn less than the legal monthly minimum wage. On the other hand, we find evidence that there is substantial non-compliance with overtime pay regulations. Over 17% of the employees are paid less than 1.5 times the minimum wage for overtime work. In addition, firms did not comply the regulations very well that minimum wage does not include the employee payments to social security or housing provident funds in Beijing and Jiangsu. We also analyzed how minimum wage affected the wage of workers. There is a positive correlation between the minimum wage and the basic wage. On the other hand, we find that there is a negative correlation between the minimum wage and the bonus. For most workers, the higher basic wage and lower bonus cancel each other out and the minimum wage is not significantly correlated with the total wage. Only for workers in the most labor-intensive firms are higher minimum wages significantly correlated with higher total wages. In order to get the expected effect, at first, minimum wage should be suitable, simple, and could be compared between different regions, and secondly law and regulations about overtime pay should be enforced. 
Serial NumberWP828 
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