Recently, an IQDS paper titled “Labor skill structure and enterprise total factor productivity: An empirical study based on China Employer - Employee Survey data”, written by Cheng Hong, Wang Chu and Luo Lianfa, has been published in Journal of South-Central University for Nationalities (a Core Journal in China).
Based on China Employer-Employee Survey data, the paper empirically examined the casual effect between labor skill structure, i.e. the proportion of skilled labor force and unskilled labor force of an enterprise, and TFP. Empirical Results by OLS regression and instrumental variables method show that upgrading labor skills structure of enterprises will strongly promote TFP of manufacturing enterprises in current economic environment. In the absence of sufficient technological innovation capability under existing conditions, Chinese enterprises focus not only on improving technical efficiency, but also absorbing and imitating international frontier technology. Different with unskilled labor, the main role of skilled labor is in the absorption and imitation of international advanced technology. The increasing proportion of skilled labor is conducive to business expansion outwards from the optimal production frontiers of existing technical conditions, and thus promotes technological progress. The paper raised two proposals as incentives for both employers and employees, including establishing association between the number of skilled labor and the amount of taxation remission and making a long-term development plans for skilled employees.