IDEAS home Printed from
   My bibliography  Save this paper

The benefits of growth for Indonesian Workers


  • Agrawal, Nisha


Indonesia's adopted development model has proved to be the most successful in alleviating poverty and benefiting workers in developing countries. The government's development efforts focused on agriculture, education, and transport infrastructure. It emphasized providing productive employment opportunities and gradually improving the labor quality through education and training. The wage, employment, and income growth rates were left to market forces. Although the rapid growth of labor-intensive manufacturing has led to more jobs and higher wages benefiting workers, workers employed in these industries have expressed growing dissatisfaction. They complain about problems of child labor, the denial of centrally mandated wages and benefits to workers, poor working conditions, and the abuse of young female workers. The government has tried to improve worker's wages and working conditions by centrally mandating higher labor standards, relying principally on minimum wages. Enforcement has improved and, despite low compliance, minimum wages are beginning to bite. Indonesians are debating whether they need labor intensive industries and whether it is a mistake to base Indonesia's growth on cheap labor. They argue that if labor is more expensive, manufacturers must substitute some capital for labor. However, if labor-intensive industries are rejected, the capacity of the economy to absorb plentiful workers will be reduced. The main alternatives are to push up wages now, or to let wages be determined by market forces and strengthen institutions that could improve working conditions, such as labor unions. The author recommends maintaining flexible labor markets and allowing market forces to set the pace of change, while strengthening labor unions.

Suggested Citation

  • Agrawal, Nisha, 1996. "The benefits of growth for Indonesian Workers," Policy Research Working Paper Series 1637, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1637

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Mason, Andrew D. & Baptist, Jacqueline, 1996. "How important are labor markets to the welfare of the poor in Indonesia?," Policy Research Working Paper Series 1665, The World Bank.
    2. Behrman, Jere R & Deolalikar, Anil B, 1995. "Are There Differential Returns to Schooling by Gender? The Case of Indonesian Labour Markets," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 97-117, February.
    3. Martín Rama, 2001. "The Consequences of Doubling the Minimum Wage: The Case of Indonesia," ILR Review, Cornell University, ILR School, vol. 54(4), pages 864-881, July.
    4. Grootaert, Christiaan & Kanbur, Ravi, 1995. "Child labor : a review," Policy Research Working Paper Series 1454, The World Bank.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Martín Rama, 2001. "The Consequences of Doubling the Minimum Wage: The Case of Indonesia," ILR Review, Cornell University, ILR School, vol. 54(4), pages 864-881, July.
    2. Belser, Patrick, 2000. "Vietnam - on the road to labor-intensive growth ?," Policy Research Working Paper Series 2389, The World Bank.
    3. Suryahadi, A. & Chen, P. & Tyers, R., 1999. "Openness, Technological Change and Labor Demand in Pre-Crisis Indonesia," ANU Working Papers in Economics and Econometrics 1999-377, Australian National University, College of Business and Economics, School of Economics.
    4. Asep Suryahadi, & Wenefrida Widyanti & Daniel Perwira & Sudarno Sumarto, 2001. "The Impact of Minimum Wage Policy on Wages and Employment in Developing Countries: The Case of Indonesia," Economics Study Area Working Papers 38, East-West Center, Economics Study Area.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1637. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.