China’s Rising Labor Remuneration andEvolving National Savings Rate

摘要

Cash flow statements suggest that China’s rising labor remuneration has had amajor impact on its national savings rate since 2008. Accordingly, this paper proposes laborremuneration hypotheses to explain the evolving trend of China’s national savings rate. Wehypothesize that: (1) The certainty and predictability of household labor remuneration haveled to excess sensitivity to consumption, with a corresponding decrease in the householdsavings rate; (2) rising household labor remuneration means a greater share of laborremuneration is paid by firms, resulting in a smaller corporate savings rate; (3) the increasein the payment of labor remuneration by firms as a share of national disposable income hasresulted in the government spending more on social welfare and public services resulting inthe government having a declining share of disposable income, less propensity to save, anda falling government savings rate. Using China’s provincial panel data of 2008-2016, weperformed an empirical test with the minimum wage standard as the instrumental variableto verify the above hypothesis. To cope with economic growth pressures, China needs to shiftfrom an investment-driven to a consumption-driven growth model and prioritize investmentefficiency over quantity.