Abstract: The increase in the minimum wage may affect the willingness of SMEs to invest in innovation through two ways: labor costs and innovation revenue expectations. Based on the survey data of Zhejiang enterprises in 2017, the paper uses structural equation modeling to test the impact of minimum wage on labor costs of SMEs, and then uses regression models to test the impact of minimum wage on SMEs′ willingness to invest in innovation. The results show that the labor cost and operation of some SMEs have been affected by the increase in the minimum wage standards, and some employee′s social insurance have been cut. The improvement of the minimum wage standard will significantly increase the labor cost of labor-intensive and private SMEs; the higher the minimum wage standard is in the region where the SMEs are located, the stronger the willingness of non labor-intensive and private SMEs to invest in innovation. Combined with two kinds of empirical results, it can be confirmed that both of them exist, and vary with enterprises.

Key words: minimum wage, small and medium-sized enterprises(SMEs), willingness to invest in innovation, labor cost, innovation revenue expectations