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

Kelly Bird (kbird@cbn.net.id) and Chris Manning

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

Abstract: This study focuses on the efficiency of minimum wage policy for poverty reduction, taking Indonesia as a case study. A simulation approach assesses who benefits and who pays for minimum wage increases. On the benefits side, the rise in minimum wages boosts incomes in households with low wage workers. However, increases in wage costs are passed on through higher consumer prices. As a result, three out of four poor households lose in net terms, even when we assume no job losses. The findings suggest that minimum wages are unlikely to be an effective antipoverty instrument, at least for Indonesia.

Keywords: Minimum Wages; Poverty; Income distribution; Indonesia (search for similar items in EconPapers)
JEL-codes: I31 J33 J38 O15 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005
New Economics Papers: this item is included in nep-cmp, nep-dev, nep-lab and nep-sea
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Citations: View citations in EconPapers (4)

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Journal Article: Minimum Wages and Poverty in a Developing Country: Simulations from Indonesia's Household Survey (2008)
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