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Minimum Wages and Poverty in a Developing Country: Simulations from Indonesia's Household Survey

Author

Listed:
  • Bird, Kelly
  • Manning, Chris

Abstract

Summary This study focuses on minimum wages, income distribution, and poverty, taking Indonesia as a case study. A simulation approach assesses who benefits and who pays for minimum wage increases. Among the poor, a minimum wages increase boosts net incomes for 21% of the households, while it results in net losses to 79% of the households. The impact is slightly less severe when there are job losses. Although minimum wage increases are mildly progressive (the non-poor pay a higher share of the costs), they are unlikely to be an effective antipoverty instrument in developing countries like Indonesia.

Suggested Citation

  • Bird, Kelly & Manning, Chris, 2008. "Minimum Wages and Poverty in a Developing Country: Simulations from Indonesia's Household Survey," World Development, Elsevier, vol. 36(5), pages 916-933, May.
    • Handle: RePEc:eee:wdevel:v:36:y:2008:i:5:p:916-933
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