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The Consequences of doubling the minimum wage: The case of Indonesia

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  • Martφn Rama

Abstract

Indonesian minimum wages were tripled in nominal terms, and doubled in real terms, in the first half of the 1990s. The author analyzes data from the 1993 labor force survey to evaluate the effects of this hike on wage earnings and wage employment. The results suggest that the minimum wage hike had a modest impact on Indonesian labor market outcomes, increasing average wages by 5-15% and decreasing urban wage employment by 0-5%. The employment effects, however, varied substantially by firm size: small firms apparently experienced substantial decreases in employment, whereas some large firms actually saw their employment increase. Workers in those large firms, the author concludes, are the evident winners from the minimum wage hike. (Author's abstract.)

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Bibliographic Info

Article provided by ILR Review, Cornell University, ILR School in its journal ILR Review.

Volume (Year): 54 (2001)
Issue (Month): 4 (July)
Pages: 864-881

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Handle: RePEc:ilr:articl:v:54:y:2001:i:4:p:864-881

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  1. Richard Dickens & Stephen Machin & Alan Manning, 1994. "The Effects of Minimum Wages on Employment: Theory and Evidence from the US," NBER Working Papers 4742, National Bureau of Economic Research, Inc.
  2. David Neumark & William Wascher, 1992. "Employment effects of minimum and subminimum wages: Panel data on state minimum wage laws," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 46(1), pages 55-81, October.
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  4. Agrawal, Nisha, 1996. "The benefits of growth for Indonesian Workers," Policy Research Working Paper Series 1637, The World Bank.
  5. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, December.
  6. David Card & Alan B. Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," NBER Working Papers 4509, National Bureau of Economic Research, Inc.
  7. Mason, Andrew D. & Baptist, Jacqueline, 1996. "How important are labor markets to the welfare of the poor in Indonesia?," Policy Research Working Paper Series 1665, The World Bank.
  8. Bell, Linda A., 1995. "The impact of minimum wages in Mexico and Colombia," Policy Research Working Paper Series 1514, The World Bank.
  9. David Neumark & William Wascher, 1995. "The Effect of New Jersey's Minimum Wage Increase on Fast-Food Employment: A Re-Evaluation Using Payroll Records," NBER Working Papers 5224, National Bureau of Economic Research, Inc.
  10. Brown, Charles, 1988. "Minimum Wage Laws: Are They Overrated?," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 133-45, Summer.
  11. Alida Castillo-Freeman & Richard B. Freeman, 1992. "When the Minimum Wage Really Bites: The Effect of the U.S.-Level Minimum on Puerto Rico," NBER Chapters, in: Immigration and the Workforce: Economic Consequences for the United States and Source Areas, pages 177-212 National Bureau of Economic Research, Inc.
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