Labor force is a very important factor of production

Labor force is a very important factor of production, especially for the modern economy which oriented by service and technology, human capital has become an important asset of enterprises . However, compared to the employer, the employee as the weak side in the labor market, their interests tend to be more susceptible, which is harmful to improve production efficiency and maintain social stability. In order to further standardize the labor relations of labor market in our country, clarify the rights and obligations of both parties of the labor contract, and protect employees’ legitimate rights and interests, our country enacted «The People’s Republic of China Labor Contract Law» on June 29, 2007 and officially implemented since January 1, 200
Compared with the «Labor Law» enacted in 1994, «Labor Contract Law» defined the probation period without a fixed term contract and economic compensation etc. clearly. «Labor Contract Law» regulated, for example, when labor contract expires, if the employer does not renew the contract or sign of the contract with reducing conditions, it shall pay economic compensation. This is the law with tendency, which strengthened the protection of laborers, but increased the firing cost of enterprises, and reduced the enterprise employment flexibility . However, «Labor Contract Law» not only has influenced on «improve firing costs» of enterprises, but also on the labor cost stickiness?enterprises lay off employees when volume declines, it increases the difficulty to lay off employees, which may intensify enterprise labor cost stickiness.
When we are talking about the concept of cost stickiness, it is necessary to go back to traditional management accounting. In the traditional model of cost behavior that pervades the accounting literature, costs are described as fixed or variable with respect to changes in activity volume. In this model, variable costs change proportionately with changes in the activity driver , implying that the magnitude of a change in costs depends only on the extent of a change in the level of activity, not on the direction of the change. But practice and the existing research have documented strong evidence of asymmetric cost behavior. Costs are «sticky» when they respond less to decreases in activity than to increases in activity . The current research literature on «Cost Stickiness» mainly are from the following two perspectives: one is the study of sticky characteristics of SG&A, operating costs eliminating the missing values of main variables. Finally we got the 9367 sample values. According to the nature of the ultimate Table 1. Variable defined.
controller, sample was divided into two groups of state-owned enterprises and non-state-owned enterprises. The number of the state-owned enterprises sample is 5621, and the number of the non-state-owned enterprises sample is 3746. The ultimate controller data come from the Wind database, other financial data come from the CSMAR database. In addition, we delete observations if the continuous variables is above 99% percentile or below 1% percentile of its distribution. The following descriptive statistics and empirical results are based on the results of the data processing. In this paper, stata12.0 software is used for data processing and regression analysis.
Empirical Results.
The paper discusses descriptive statistics of sample data. Labor costs increased year by year, from 115.77 million in 2004 to 611.91 million in 2011. The proportion of labor costs accounting for sales revenue is from 8.4% in 2004 to 10.09% in 2011. The difference between average growth rate of labor costs and sales revenue growth rate is little. Labor costs are rising fast, and it is likely to be sticky..

Conclusions and Limitations

In recent years, Chinese companies face with rising labor cost pressure and the risk of labor shortage, and implementation of «Labor Contract Law». These provide a good opportunity for researching the labor costs stickiness characteristics of domestic enterprises. This paper analyzes the labor cost stickiness characteristics and the influence of the «labor contract law» with a large sample of firms in China during 2004-2011. The main conclusions of this paper are as follows: firstly, the labor cost of listing firms in China is sticky; secondly, the stickiness of state-owned enterprises is higher than that of non-state-owned enterprises; finally, implementation of «labor contract law» increased labor cost stickiness of both state-owned enterprises and non-state-owned enterprises. These conclusions guide the direction of cost management. State-owned enterprises should further accelerate the pace of market-oriented reform, weaken the influence of the government intervention, adjust human resource in accordance with the rules of market economy, thereby reducing the labor cost stickiness. Furthermore, the conclusion also provides evidence for the economic consequences after the implementation of the «Labor contract law». Labor force is a very important factor of production, especially for the modern economy which oriented by service and technology, human capital has become an important asset of enterprises . However, compared to the employer, the employee as the weak side in the labor market, their interests tend to be more susceptible, which is harmful to improve production efficiency and maintain social stability. In order to further standardize the labor relations of labor market in our country, clarify the rights and obligations of both parties of the labor contract, and protect employees’ legitimate rights and interests, our country enacted «The People’s Republic of China Labor Contract Law» on June 29, 2007 and officially implemented since January 1, 200
Compared with the «Labor Law» enacted in 1994, «Labor Contract Law» defined the probation period without a fixed term contract and economic compensation etc. clearly. «Labor Contract Law» regulated, for example, when labor contract expires, if the employer does not renew the contract or sign of the contract with reducing conditions, it shall pay economic compensation. This is the law with tendency, which strengthened the protection of laborers, but increased the firing cost of enterprises, and reduced the enterprise employment flexibility . However, «Labor Contract Law» not only has influenced on «improve firing costs» of enterprises, but also on the labor cost stickiness?enterprises lay off employees when volume declines, it increases the difficulty to lay off employees, which may intensify enterprise labor cost stickiness.
When we are talking about the concept of cost stickiness, it is necessary to go back to traditional management accounting. In the traditional model of cost behavior that pervades the accounting literature, costs are described as fixed or variable with respect to changes in activity volume. In this model, variable costs change proportionately with changes in the activity driver , implying that the magnitude of a change in costs depends only on the extent of a change in the level of activity, not on the direction of the change. But practice and the existing research have documented strong evidence of asymmetric cost behavior. Costs are «sticky» when they respond less to decreases in activity than to increases in activity . The current research literature on «Cost Stickiness» mainly are from the following two perspectives: one is the study of sticky characteristics of SG&A, operating costs eliminating the missing values of main variables. Finally we got the 9367 sample values. According to the nature of the ultimate Table 1. Variable defined.
controller, sample was divided into two groups of state-owned enterprises and non-state-owned enterprises. The number of the state-owned enterprises sample is 5621, and the number of the non-state-owned enterprises sample is 3746. The ultimate controller data come from the Wind database, other financial data come from the CSMAR database. In addition, we delete observations if the continuous variables is above 99% percentile or below 1% percentile of its distribution. The following descriptive statistics and empirical results are based on the results of the data processing. In this paper, stata12.0 software is used for data processing and regression analysis.
Empirical Results.
The paper discusses descriptive statistics of sample data. Labor costs increased year by year, from 115.77 million in 2004 to 611.91 million in 2011. The proportion of labor costs accounting for sales revenue is from 8.4% in 2004 to 10.09% in 2011. The difference between average growth rate of labor costs and sales revenue growth rate is little. Labor costs are rising fast, and it is likely to be sticky.. The Existence of Labor Cost Stickiness
According to the previous research design, this paper takes the model to test the existence of the labor cost stickiness, and the regression results are shown in Table 2. Through the model , we test the characteristics of the labor cost of the listing Corporation in our country. By regression of all samples, ?1 is 0.392, namely labor costs increase 0.392% with 1% increase in sales revenue. ?2 is ?0.159, ?1 + ?2 = 0.233%, namely labor costs decrease 0.233% with 1% decrease in sales revenue. ?1 and ?2 are significant at the 1% level, which proves that the labor cost in China’s listing Corporation is «sticky» and verifies the hypothesis 1.
By regression of sub-sample of state-owned enterprises, ?1 is 0.467, namely labor costs increase 0.467% with a 1% increase in sales revenue. ?2 is ?0.258, ?1 + ?2 = 0.209%, namely labor costs decrease 0.209% with 1% decrease in sales revenue.?1 and ?2 are significant at the 1% level, which proves that the labor cost in the state-owned listed companies is «sticky». Degrees of stickiness of state-owned is 0.258%.
Similarly, by regression of sub-sample of non-state-owned enterprises, ?1 is 0.335, namely labor costs increase 0.335% with a 1% increase in sales revenue. ?2 is ?0.092, ?1 + ?2 = 0.243%, namely labor costs decrease 0.243% with 1% decrease in sales revenue.?1 and ?2 are significant at the 1% level, which proves that the labor cost in the non-state-owned listed companies is «sticky». Degrees of stickiness of non-state-owned is 0.092%.
This paper adopts Chow test to test differences in grouping regression coefficient ?2. Test results show that, chi2 = 2.81, p = 0.094 ; 0.1. Therefore, degrees of stickiness of state-owned is significantly higher than that of non-state owned enterprises, which verifies the hypothesis 2.
Table 2. The existence of labor cost stickiness.
Based on the previous design, we use the model 2 to empirically test whether the implementation of the «Labor contract law» has an impact on labor cost stickiness as shown in Table 3.
By regression of all samples, ?1 is 0.407, namely labor costs increase 0.407% with 1% increase in sales reve-
Table 3. Labor protection and labor cost stickiness.
nue. ?2 is ?0.206, namely labor costs decrease 0.201% with 1% decrease in sales revenue before implementation of the «Labor contract law». Degree of stickiness is 0.206% . ?3 is ?0.15, namely labor costs decrease 0.051% with 1% decrease in sales revenue after implementation of the «Labor contract law». Degree of stickiness is 0.356% . ?3 are significant at the 1% level, indicating that the implementation of the «Labor contract law» intensify labor cost stickiness.
By regression of sub-sample of state-owned enterprises, ?1 is 0.469, namely labor costs increase 0.469% with 1% increase in sales revenue. ?2 is ?0.205, namely labor costs decrease 0.264% with 1% decrease in sales revenue before implementation of the «Labor contract law». Degree of stickiness is 0.205% . ?3 is ?0.194, namely labor costs decrease 0.070% with 1% decrease in sales revenue after implementation of the «Labor contract law». Degree of stickiness is 0.399% . Similarly, by regression of sub-sample of non-state-owned enterprises, ?1 , ?2 and ?3 are significant. Before the implementation of the «Labor contract law», labor cost stickiness is 0.238% ; while labor cost stickiness is 0.36% . The empirical results show that: the implementation of the «Labor contract law» has an impact on both the state-owned enterprises and non-state-owned enterprises, which has increased labor cost stickiness, verifying the hypothesis 3.

Conclusions and Limitations

In recent years, Chinese companies face with rising labor cost pressure and the risk of labor shortage, and implementation of «Labor Contract Law». These provide a good opportunity for researching the labor costs stickiness characteristics of domestic enterprises. This paper analyzes the labor cost stickiness characteristics and the influence of the «labor contract law» with a large sample of firms in China during 2004-2011. The main conclusions of this paper are as follows: firstly, the labor cost of listing firms in China is sticky; secondly, the stickiness of state-owned enterprises is higher than that of non-state-owned enterprises; finally, implementation of «labor contract law» increased labor cost stickiness of both state-owned enterprises and non-state-owned enterprises. These conclusions guide the direction of cost management. State-owned enterprises should further accelerate the pace of market-oriented reform, weaken the influence of the government intervention, adjust human resource in accordance with the rules of market economy, thereby reducing the labor cost stickiness. Furthermore, the conclusion also provides evidence for the economic consequences after the implementation of the «Labor contract law». State-owned enterprises should accelerate market oriented process and adjust the labor force resources according to the operating performance of enterprises, thus to reduce the cost of labor
In the era of knowledge economy, human resources are very important for enterprise production efficiency. The implementation of «labor contract law» not only protects the rights and interests of the employees, but also is conducive to improve production efficiency and maintain social stability. Therefore strengthening labor protection is positive. However, this article provides evidence of the negative economic consequences of labor protection only from the perspective of cost stickiness, which are unilateral. Because there are differences in the efficiency of law enforcement in different regions of our country, the level of labor protection in different regions is different, which may be led to differences in the cost stickiness. But this paper did not answer this question, and not to measure the level of labor protection. These not only are limitations of this paper, but also the direction of further research in the future.«

When we are talking about the concept of cost stickiness, it is necessary to go back to traditional management accounting. In the traditional model of cost behavior that pervades the accounting literature, costs are described as fixed or variable with respect to changes in activity volume. In this model, variable costs change proportionately with changes in the activity driver , implying that the magnitude of a change in costs depends only on the extent of a change in the level of activity, not on the direction of the change. Variable defined.

Controller, sample was divided into two groups of state-owned enterprises and non-state-owned enterprises. The following descriptive statistics and empirical results are based on the results of the data processing. In this paper, stata12.0 software is used for data processing and regression analysis. Through the model , we test the characteristics of the labor cost of the listing Corporation in our country.

This paper adopts Chow test to test differences in grouping regression coefficient ?2. ?3 are significant at the 1% level, indicating that the implementation of the «Labor contract law» intensify labor cost stickiness.

Conclusions and Limitations

In recent years, Chinese companies face with rising labor cost pressure and the risk of labor shortage, and implementation of «Labor Contract Law». These provide a good opportunity for researching the labor costs stickiness characteristics of domestic enterprises. This paper analyzes the labor cost stickiness characteristics and the influence of the «labor contract law» with a large sample of firms in China during 2004-2011. Because there are differences in the efficiency of law enforcement in different regions of our country, the level of labor protection in different regions is different, which may be led to differences in the cost stickiness.

But this paper did not answer this question, and not to measure the level of labor protection.