This article uses panel data from 28 provincial-level regions from 1994 to 2017 and uses the C-D production function to calculate the degree of labor wage distortion in various provinces of China. It is found that the vast majority of provinces in China have serious downward labor wage distortion, and the actual wages of labor are underestimated, especially in the economically developed eastern region, followed by the central region, and the western region has the lowest degree of wage distortion; From the perspective of time span, China's labor wage distortion shows an overall trend of easing. Through empirical analysis and research, it has been found that in two aspects of China's opening up to the outside world, foreign direct investment has significantly exacerbated labor wage distortions, while foreign trade has significantly alleviated labor wage distortions. In addition, the degree of marketization, government intervention, and industrial restructuring have effectively alleviated labor wage distortions. Based on the above situation, this article proposes policy recommendations such as optimizing the international trade environment, improving the quality of foreign investment access, enhancing the quality of labor force, and deepening the degree of labor marketization reform.