The employment effects of minimum wage hikes on job and geographical mobility: evidence from China

As most studies on the employment effects of the minimum wage rely on static employment frameworks, dynamic factors, such as labour mobility, have not been sufficiently explored. To address this gap in the literature, this study examines the employment effects of minimum wage hikes and the dynamic impact on job mobility (local position shifts) and geographical mobility (cross-regional labour relocation). We use data from the Urban Household Surveys in China from 2010 to 2014 and the China Household Finance Surveys from 2017 to 2019. The analysis reveals that minimum wage hikes negatively affect employment; however, the unemployment effect is nonlinear, with a less pronounced unemployment effect at the 60th percentile. From a dynamic perspective, the minimum wage hikes are associated with an increased likelihood of job transition among urban workers. Additionally, these transitions are often accompanied by a wage decline, especially in the low-friction service industry. Further, the hikes are associated with a higher incidence of return migrants and no significant increase in the aggregate unemployment rate. This study provides new evidence on the effects of minimum wage increases on dynamic job-mobility patterns and geographical reallocation, offering important new insights for minimum wage policies.