The Nexus Between Labor Rights Protection and Manufacturing Production Efficiency: A Case Study of China’s Minimum Wage System

This study investigates whether the implementation of minimum wage regulations in China has effectively enhanced the productivity of the manufacturing sector while adequately protecting the rights of the labor force. We find that policy implementation will improve firms’ compliance, narrow the labor price distortion gap between firms, and improve static allocation. It will also dredge the market exit channel, improve the dynamic allocation of resources, and create a productivity-forcing mechanism. We conduct empirical testing using data for industrial enterprises and minimum wage data for prefecture-level cities. We confirm that minimum wage regulations favorably affect manufacturing industry productivity and help achieve the goals of “ensuring safety” and “increasing efficiency.” Therefore, the government should further improve the minimum wage supervision system, enhance the supervision of small, low-productivity enterprises and give full play to its incentivizing effects on market mechanisms and production efficiency.