In order to strengthen the protection of labors’ legitimate rights and interests, and build stable and harmonious labor relations, China has continuously promoted the reform of labor market system. For example, the " Minimum Wage Regulation” has been enacted in 2004, and the " Labor Contract Law” has been implemented in 2008. The promulgation and implementation of the legal system can improve the protection of legitimate rights and interests of labors to a great extent. As a representative of labor protection system, does the new " Labor Contract Law” really protect the enterprise grass-roots staff and increase the value of the enterprise? Up to now, it still inspires fierce discussion in academic circle. Based on China’s A-share listed data, and using the empirical study of large sample research method, we study the influence of labor protection (LP) on enterprise performance-pay sensitivity (PPS), and identify differences of this effect between employees and executives to find new evidences of the economic consequences of labor protection. The results show that LP reduces the overall PPS in an enterprise, and reduces the executives’ PPS but increases employees’ PPS; after considering industry factor, it indicates that LP adds PPS of employees and enterprises with high labor intensity, but lowers executives’ PPS; corporate governance can inhibit the negative effects of LP on enterprise PPS. This paper shows that some certain rules in current " Labor Contract Law” may be disconnected from possible reality, and especially, rights relation adjustment in the " Labor Contract Law” is restricted by social economic relations, so this law can gain labor protection of the rights of employees at the grass-roots level, but may prejudice the legitimate interests of executives, and then decrease the efficiency of enterprise incentive mechanism, leading to a sharp decline in enterprise value in the end. To solve this problem, we should further improve the supporting system of labor legislation and socialist market economy system, and speed up the transformation of development way, so as to create sound conditions and system base for the construction of harmonious labor relationship and a harmonious society. This paper enriches the literature of the economic consequences research of " Labor Contract Law”, and shows that the enforcement of labor protection law should consider the interests of executives and employees at the same time, in order to reach the " win-win” situation between internal stakeholders, then build fair and justice enterprise labor relations, and win the maximization of social welfare.
Labor Protection: Protect Employees or Give Preferential Treatment to Executives? From a Perspective of Performance-pay Sensitivity
Journal of Shanghai University of Finance and Economics Vol. 20, Issue 03, pp. 44 - 62 (2018) DOI:10.16538/j.cnki.jsufe.2018.03.004
Cite this article
Luo Jingbo. Labor Protection: Protect Employees or Give Preferential Treatment to Executives? From a Perspective of Performance-pay Sensitivity[J]. Journal of Shanghai University of Finance and Economics, 2018, 20(3): 44-62.
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