Minimum Wage and Educational Pathways in Indonesia: General or Vocational Tracks?

Dyah Pritadrajati, Nurina Merdikawati (), Sweta Saxena and Alexander Tjahjadi
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Dyah Pritadrajati: Arndt-Corden Department of Economics, Crawford School of Public Policy, College of Asia and the Pacific, Australian National University, Canberra, Australia
Nurina Merdikawati: Global Institute for Women’s Leadership, Australian National University, Canberra, Australia

Asian Development Review (ADR), 2024, vol. 41, issue 02, 107-135

Abstract: This study investigates the relationship between minimum wage policies and educational choices, specifically the decision between vocational and general school enrollment. While higher minimum wages often attract students to vocational education as a faster route to employment, our analysis of Indonesia Family Life Survey data finds little evidence of increased enrollment in vocational education. This suggests that hikes in the minimum wage are unlikely to divert students away from general education. Our findings reveal notable heterogeneity, showing that an increase in the minimum wage is associated with a statistically significant reduction in the likelihood of men and individuals in rural areas to opt for vocational education. These findings underscore the critical need for Indonesia to revitalize its vocational education system, striking a balance between general and vocational pathways to equip its workforce with the skills required for a rapidly changing environment.

Keywords: general education; minimum wage; senior secondary school choice; vocational education (search for similar items in EconPapers)
JEL-codes: I25 J01 J30 O10 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0116110524400110

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