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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)

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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Bibliographic Info

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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