Does the Low-Carbon Transition Affect the Wage Level of Enterprises? Evidence from China’s Low-Carbon City Pilot Policies

Abstract

ESG (Environmental, Social, and Governance) performance is necessary to establish sustainable corporations. As the scale effect of the market application of low-carbon technologies is yet to be realised, China’s enterprises may find it difficult to balance their environmental (low-carbon transition) and social (increase in wages) responsibilities, and are caught in a governance dilemma. Therefore, in order to test the above hypotheses, we utilised the staggered difference-in-differences method to investigate the wage effects of low-carbon transformations. The results are displayed as follows. First, the low-carbon transition constraint initially increases firms’ labour demand and reduces energy consumption, leading to lower productivity and thus negatively affecting firms’ wages, even though the low-carbon transition can promote internal equity. Second, the impact of the policy on wages is heterogeneous. It has a more pronounced negative impact on enterprise wages in state-owned enterprises, old enterprises, primary and secondary industry enterprises, and low-carbon enterprises, whereas its promoting effect on internal fairness within old enterprises, secondary industry enterprises, and low-carbon enterprises is more significant. Finally, the negative impact of low-carbon policies on corporate wages gradually decreases while strengthening the promoting effect on the internal fairness of employee remuneration. The above results confirm that at this stage, when China’s enterprises are pursuing the environmental goal of low-carbon transition, it will affect their efficiency in the short term, which in turn will lead to lower wages. Moreover, this problem is too difficult to be solved by enterprises alone and requires assistance from the government. Under the ESG concepts, we provide insights into how to coordinate policies to improve living standards and promote low-carbon transformations.