The Effect of Public Pension Contribution Rate Reductions on Employee Wages: Evidence from China

China’s 2019 reform cut the employer public pension contribution rate from 20% to 16%. Using a difference-in-differences design on panel data from A-share listed firms over 2014–2023, we examined whether these savings translated into employee wage gains. Estimates showed that the reform raised average wages by approximately 2%, implying a pass-through of about 24.7% of the employer cost saving and roughly half the advanced-economy benchmark. Mechanism evidence is consistent with two channels: a distributional channel operating through within-firm pay restructuring and a growth channel operating through eased financing constraints. Wage effects were concentrated among private, labor-intensive, and high-human-capital firms.