Labor Costs Change,Cost-Price Transmission and Income Distribution:An Investigation Based on the Reduction in Social Security Contributions
With the gradual disappearance of China's demographic bonus and the acceleration of population aging,firms are facing increasing labor costs.The rise of labor costs has marked dual characteristics:on the one hand,rising labor costs implies the increase of labor income and the improvement of worker welfare;on the other hand,rising labor costs will reduce firms'labor demand,lower equilibrium wage and employment.Moreover,low-income workers are more vul-nerable to this negative shock due to their weak bargaining power.At the same time,labor costs will also be passed to consumers through price transmission,further reducing the real income and widening households'consumption gap as a result of the difference in consumption structure.The above mechanism implies that policies to hedge against rising labor costs can effectively alleviate the contradiction among the improvement of employees'welfare,the reduction of enter-prises'labor demand and the widening of workers'income gap.Recently,in order to stimulate domestic demand and deepen supply-side reform,China has successively introduced a series of policies aiming to reduce firms'labor costs,such as decreasing the social security contribution base,delaying the payment of social security fees,etc.These policies have proven effective in reducing the business cost of enterprises.However,the impact of these policies on income distribution is basically unknown.Current researches typically focus on nominal income inequality,ignoring the role played by price mechanism.Real income inequality incorporates price differ-entials,can more accurately reflect difference of household welfare.This study examines the distributional effect of social security contribution reduction policy in offsetting the rising labor cost.This study divides the effect of social security contributions on real income inequality into two parts:nominal in-come and price adjustment.By combining utility functions and QUAIDS,we find that the reduction in social security con-tributions boosts workers'real income by raising their nominal income and reducing prices.The improvement is greater for those with lower incomes.Nominal income growth mainly benefits middle-and lower-income families,accounting for 2/3 of the improvement,while price reductions make up the remaining 1/3.As household income rises,price adjust-ments become more and more important,accounting for over 70％of high-income households'utility boost.The contributions of this study mainly include the following three aspects.First,it links the policy of reducing labor costs with the reduction of real income inequality for the first time,expanding the research boundary of income inequal-ity.Second,this study discusses how labor cost affects household consumption and real income inequality from both price adjustment and income change;quantifying the role of price fluctuations in household welfare changes provides new insights into the causes of income inequality.Third,the analysis framework of this research provides a general method to analyze the distributional effect of the"tax and fee reduction",which is conducive to a more comprehensive understanding of the effect of policies related to reducing enterprise operating costs,and also help to fully evaluating the role of the"tax and fee reduction"in stimulating consumption and reducing real income inequality.
Labor Costs ChangeReal Income InequalityHousehold Consumption
万方数据
维普
