In recent years, China has significantly raised its minimum wage standards, resulting in a substantial increase in labor costs that undoubtedly affect the operational and financial behaviors of firms. This study, based on manually collected data from 339 cities nationwide and focusing on A-share listed companies, reveals that increases in minimum wage standards prompt companies to increase their cash holdings. For every ￥100 increase in the monthly minimum wage standards in the company’s location, its cash reserves increase by 299〖WTXT〗%〖WTBZ〗. Mechanism analysis suggests that the upward adjustment in minimum wage standards reinforces both transactional and precautionary motives for cash holdings. Companies primarily rely on internal financing to boost their cash reserves, notably by enhancing working capital management efficiency. Further investigations show that the positive effect of minimum wage standards hikes on cash holdings is more pronounced in companies facing stringent financing constraints, weaker corporate governance, lower marketization levels in their locations, and higher proportions of low-educated workers. Additionally, the positive impact of minimum wage standards increases on cash holdings exhibits persistence, and the cash accumulation behavior is beneficial for the company’〖KG-*5〗s market value under such circumstances. This research indicates that improving operational capital management efficiency to increase cash holdings serves as an effective strategy for companies to cope with the pressure of rising minimum wage standards and associated risks.