In this study we examine the extent to which firms pass back the cost of pollution regulation to workers, in the form of lower wages, using a unique matched employer-employee dataset for Shanghai. The benefits and costs of pollution regulation in China are important topics to study as China comes under increasing pressure to move from a single-minded focus on energy-driven economic growth to a more balanced approach to economic growth. The benefits of such a shift, particularly in terms of health, are relatively well studied, but the costs are less so. The hip-pocket effect of pollution regulation on workers wages is particularly important, given that it is likely to influence public support for a more balanced approach. Our main finding is that the reduction in average wages attributable to firms taking measures to control for pollution is between 13.8 and 18.8 , all things being equal.