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Minimum Wage Impacts on Wages and Employment Across Manufacturing Establishments of Different sizes in Indonesia

Author

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  • Nurina Merdikawati
  • Ridho Al Izzati

Abstract

We evaluate the effects of minimum wage increases on wages and employment across micro-, small-, medium- and large-sized manufacturing establishments in Java, Indonesia. Using a comprehensive establishment-level dataset for 2000–14, we account for time-varying heterogeneity through district-pair-year fixed effects to address potential endogeneity concerns. Our results show positive wage effects for production workers in medium- and large-sized establishments, with no wage effects for non-production workers. We find no employment effects for production and non-production workers, and that minimum wage increases have no impact on wages or employment in micro- and small-sized manufacturing establishments. Overall, despite substantial minimum wage increases during this period, there is no evidence that the minimum wage policy either hinders or promotes overall employment creation in Indonesia’s manufacturing sector.

Suggested Citation

  • Nurina Merdikawati & Ridho Al Izzati, 2026. "Minimum Wage Impacts on Wages and Employment Across Manufacturing Establishments of Different sizes in Indonesia," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 62(2), pages 245-273, May.
    • Handle: RePEc:taf:bindes:v:62:y:2026:i:2:p:245-273
    DOI: 10.1080/00074918.2026.2664402
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