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Absorption of Formal and Informal Sector Workers through the Minimum Wage: Studies in Indonesia

Author

Listed:
  • Ariani
  • Devanto Shasta Pratomo
  • Marlina Ekawaty
  • David Kaluge

Abstract

This study aims to determine the effect of the minimum wage on employment in the formal and informal sectors in Indonesia. This study has a panel data set with a total of 170 observations consisting of 34 provinces in Indonesia during the 2017-2021 period. The use of the Ordinary Least Square (OLS) method, fixed effect, and random effect are used to compare the results of the three methods used. The results explain that the minimum wage has a negative and significant effect on the absorption of formal sector workers, while the minimum wage has a positive and significant effect on the absorption of informal sector workers.

Suggested Citation

  • Ariani & Devanto Shasta Pratomo & Marlina Ekawaty & David Kaluge, 2024. "Absorption of Formal and Informal Sector Workers through the Minimum Wage: Studies in Indonesia," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 128-143.
    • Handle: RePEc:bas:econst:y:2024:i:3:p:128-143
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    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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