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Do minimum wages affect employment? Evidence from the manufacturing sector in Indonesia

Author

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  • Ximena Del Carpio
  • Ha Nguyen
  • Laura Pabon
  • Liang Wang

Abstract

This paper investigates the impact of minimum wages on employment and wages in Indonesian manufacturing firms between 1993 and 2006. It shows that within firms, the employment effects of minimum wage hikes is negative. It finds significant, negative employment effects of minimum wages among small firms and for non-production, less-educated and female workers. The paper also finds that minimum wages are more correlated with small firms’ average wages than large firms’, suggesting that minimum wages are more binding in small firms. Jel codes: J08, J16, J20, J31, L60 Copyright Del Carpio et al. 2015

Suggested Citation

  • Ximena Del Carpio & Ha Nguyen & Laura Pabon & Liang Wang, 2015. "Do minimum wages affect employment? Evidence from the manufacturing sector in Indonesia," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-30, December.
    • Handle: RePEc:spr:izaldv:v:4:y:2015:i:1:p:1-30:10.1186/s40175-015-0040-8
    DOI: 10.1186/s40175-015-0040-8
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    2. Sjöholm, Fredrik, 2020. "Minimum Wages and Firm-Level Employment in a Developing Country," Working Papers 2020:4, Lund University, Department of Economics.
    3. Kyunghoon Kim & Andy Sumner & Arief Anshory Yusuf, 2018. "Is structural transformation-led economic growth immiserising or inclusive? The case of Indonesia," Departmental Working Papers 2018-11, The Australian National University, Arndt-Corden Department of Economics.
    4. Baensch Laura & Lanzalot Maria Laura & Stucchi Rodolfo & Lotti Giulia, 2019. "Do Labor Market Regulations Affect the Link between Innovation and Employment? Evidence from Latin America," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(3), pages 1-13, July.
    5. Tushar Bharati & Wina Yoman, 2021. "Internal Migration and Labor Market Outcomes in Indonesia," Economics Discussion / Working Papers 21-05, The University of Western Australia, Department of Economics.
    6. McGuinness, Seamus & Redmond, Paul & Delaney, Judith, 2019. "The prevalence and effect on hours worked of the minimum wage in Ireland: A sectoral and regional analysis," Research Series, Economic and Social Research Institute (ESRI), number RS93, August.
    7. Neumark, David & Munguía Corella, Luis Felipe, 2021. "Do minimum wages reduce employment in developing countries? A survey and exploration of conflicting evidence," World Development, Elsevier, vol. 137(C).
    8. Jiménez Martínez, Mónica & Jiménez Martínez, Maribel, 2021. "Are the effects of minimum wage on the labour market the same across countries? A meta-analysis spanning a century," Economic Systems, Elsevier, vol. 45(1).

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