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Navigating climate uncertainty: employment effects of social security contributions in China
Feifei Chen1, Yadong Cui2, Yongsheng Ji3
1School of Economics and Management, Shandong Youth University of Political Science, Jinan, China.
Introduction:
As an institutional component of labor costs, social insurance contributions (SIC) directly shape firms' employment decisions.
Methods:
Using data from China's A-share listed companies from 2007 to 2019, and exploiting the implementation of the social insurance law (SIL) of China in 2011 as a quasi-natural experiment, this paper investigates the impact of social insurance contributions on corporate labor employment decisions and the underlying mechanisms.
Results:
The results show that an increase in social insurance contributions significantly reduces the scale of corporate labor employment. An analysis of the cost-shifting effect reveals that, compared with reducing wages, firms are more likely to reduce employment to alleviate the burden of social insurance contributions. Mechanism analysis indicates that higher social insurance contributions reduce labor employment through three channels: tightening liquidity constraints, reducing production scale, and increasing capital input. Heterogeneity analysis shows that the nega-tive effect of increased social insurance contributions on labor employment is more pronounced among firms with severe financing constraints and those with larger pre-existing labor employment scales.
Discussion:
Our findings deepen the understanding of the labor‑market consequences of social security policies and provide empirical evidence for balancing social security obligations and stable corporate employment.