The Impact of Minimum Wage Policy on Wages and Employment in Developing Countries: The Case of Indonesia

Asep Suryahadi, Wenefrida Widyanti, Daniel Perwira and Sudarno Sumarto ()
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Wenefrida Widyanti: SMERU Research Institute, Jakarta
Daniel Perwira: SMERU Research Institute, Jakarta

No 38, Economics Study Area Working Papers from East-West Center, Economics Study Area

Abstract: Since the late 1980s, minimum wage have become an important plank of the Indonesian government's labour policy. Minimum wages have increased faster than average wages and GDP. As a result, minimum wages have become binding for the majority of workers. This study finds that minimum wages have a positive but statistically insignificant impact on average wages. On the other hand, minimum wages have a negative and statistically significant impact on employment. In particular, the disemployment impact is greatest for women, youth, and less educated workers. However, the employment prospects of white-collar workers are enhanced by increases in minimum wages.

Pages: 39 pages
Date: 2001-12
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Citations: View citations in EconPapers (5)

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