The Impact of Minimum Wage Policy on Service Sector Employment: Evidence from Multi-period DID

Abstract

This paper investigates the impact of minimum wage policy on employment in China’s service sector using a multi-period difference-in-differences (DID) framework. Drawing on a balanced panel of 285 prefecture-level cities from 2015 to 2022, the authors estimate the average effect of minimum wage adjustments on the share of service employment. The baseline results indicate that minimum wage hikes significantly reduce the service sector employment rate by approximately 3.2 percentage points. Further heterogeneity analysis reveals that life-related services experience a greater negative impact than production-related services, reflecting differences in labor intensity and wage sensitivity. Robustness checks, including pre-trend and placebo tests, confirm the validity of the identification strategy. These findings support the hypothesis that wage rigidity may lead to labor demand contraction, particularly in low-skill intensive sectors. Policy implications include the adoption of differentiated wage floors by sector and enhanced monitoring of informal employment responses. This study contributes to the growing body of empirical literature on minimum wage policy in developing economies.