LABOR ABSORPTION UNDER MINIMUM WAGE POLICY IN INDONESIA

Nur Feriyanto () and Jaka Sriyana
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Nur Feriyanto: Department of Economics, Universitas Islam Indonesia Condong Catur, Depok, Sleman, Yogyakarta, Indonesia, 55283, Phone number: +62811282632

Regional Science Inquiry, 2016, vol. VIII, issue 1, 11-21

Abstract: This study analyzes the impact minimum wage policy and some economic factors on labor absorption in Indonesia. For this purpose, this research used provincial panel data for the period of 2006 to 2013. The study reveals that minimum wage policy across provinces has created unemployment trap in this period. It can be inferred that minimum wage policy failed to support the local economy to better and more stable society welfare. This research also found an unexpected result regarding to the role of economic growth to labor absorption. Economic growth across provinces has not contributed yet to the increasing employment rate in the local economy. Moreover, this finding reveals that provincial labor absorption was also affected by geographical factors. The provinces which are located at the west Indonesia tend to have high empolyment rate. This phenomenon indicates the existence of unbalanced development in the country.

Keywords: wage; employment; policy; investment; economic growth (search for similar items in EconPapers)
JEL-codes: C21 J23 J30 J31 J38 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:hrs:journl:v:viii:y:2016:i:1:p:11-21

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