Local Employment Growth Targets, Resource Misallocation, and Enterprise Total Factor Productivity

Presetting annual employment growth targets is a key measure for Chinese governments at all levels to stabilize employment, yet this practice tends to distort resource allocation and cause productivity losses. Based on the employment growth targets specified in the government work reports of prefecture-level cities from 2014 to 2024, combined with data on A-share listed companies, this paper examines the impact of local employment targets on enterprises' total factor productivity (TFP). The results show that the employment growth target system significantly inhibits enterprises' TFP. Specifically, for every 10% increase in the local employment growth target, the enterprise TFP decreases by 0.16%, with a more pronounced effect in state-owned enterprises, labor-intensive industries, and regions with higher target fulfillment rates. Mechanism analysis indicates that local employment targets lower productivity by aggravating labor redundancy and restraining human resource reallocation. From a cost-benefit perspective, although these targets can expand short-term employment, this effect fails to offset the negative impact of productivity losses on operating revenue. Furthermore, the long-term erosion of profit margins weakens enterprises' sustainable employment capacity. This study reveals the productivity loss risk of the employment target system, providing insights for optimizing target setting and achieving policy coordination between stabilizing employment and boosting enterprise productivity.