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The Impact of Minimum Wage Policy on Wages and Employment in Developing Countries: The Case of Indonesia

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Author Info
Asep Suryahadi, () (SMERU Research Institute, Jakarta)
Wenefrida Widyanti (SMERU Research Institute, Jakarta)
Daniel Perwira (SMERU Research Institute, Jakarta)
Sudarno Sumarto (SMERU Research Institute, Jakarta)

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Abstract

Since the late 1980s, minimum wage have become an important plank of the Indonesian government's labour policy. Minimum wages have increased faster than average wages and GDP. As a result, minimum wages have become binding for the majority of workers. This study finds that minimum wages have a positive but statistically insignificant impact on average wages. On the other hand, minimum wages have a negative and statistically significant impact on employment. In particular, the disemployment impact is greatest for women, youth, and less educated workers. However, the employment prospects of white-collar workers are enhanced by increases in minimum wages.

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Paper provided by East-West Center, Economics Study Area in its series Economics Study Area Working Papers with number 38.

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Length: 39 pages
Date of creation: Dec 2001
Date of revision:
Handle: RePEc:ewc:wpaper:wp38

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Maloney, William F. & Nunez, Jairo & Cunningham, Wendy & Fiess, Norbert & Montenegro, Claudio & Murrugarra, Edmundo & Santamaria,Mauricio & Sepulveda, Claudia, 2001. "Measuring the impact of minimum wages : evidence from Latin America," Policy Research Working Paper Series 2597, The World Bank. [Downloadable!]
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  2. Agrawal, Nisha, 1996. "The benefits of growth for Indonesian Workers," Policy Research Working Paper Series 1637, The World Bank. [Downloadable!]
  3. Cox Edwards, Alejandra, 1996. "Labor regulations and industrial relations in Indonesia," Policy Research Working Paper Series 1640, The World Bank. [Downloadable!]
  4. David Neumark & Mark Schweitzer & William Wascher, 2000. "The Effects of Minimum Wages Throughout the Wage Distribution," NBER Working Papers 7519, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. 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. [Downloadable!]
  6. David Neumark & William Wascher, 1995. "The Effect of New Jersey's Minimum Wage Increase on Fast-Food Employ- ment: A Re-Evaluation Using Payroll Records," NBER Working Papers 5224, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Chris Manning, 1994. "What has Happened to Wages in the New Order?," Bulletin of Indonesian Economic Studies, Taylor and Francis Journals, vol. 30(3), pages 73-114, August. [Downloadable!] (restricted)
  8. Rama, Martin, 1996. "The consequences of doubling the minimum wage : the case of Indonesia," Policy Research Working Paper Series 1643, The World Bank. [Downloadable!]
  9. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-93, September. [Downloadable!] (restricted)
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Cited by:
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  1. Dieter Ernst, 2004. "Searching for a New Role in East Asian Regionlization: Japanese Production Networks in the Electronics Industry," Economics Study Area Working Papers 68, East-West Center, Economics Study Area. [Downloadable!]
  2. Boy Luethje, 2004. "Global Production Networks and Industrial Upgrading in China: The Case in Electronics Contract Manufacturing," Economics Study Area Working Papers 74, East-West Center, Economics Study Area. [Downloadable!]
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