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Labor Absorption Under Minimum Wage Policy In Indonesia

Author

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  • Nur FERIYANTO

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

  • Jaka SRIYANA

    (Department of Economics, Universitas Islam Indonesia. Condong Catur, Depok, Sleman, Yogyakarta, Indonesia, 55283, Phone number: +628328034715)

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.

Suggested Citation

  • Nur FERIYANTO & Jaka SRIYANA, 2016. "Labor Absorption Under Minimum Wage Policy In Indonesia," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 11-21, June.
    • Handle: RePEc:hrs:journl:v:viii:y:2016:i:1:p:11-21
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    File URL: http://www.rsijournal.eu/ARTICLES/June_2016/1.1.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Ramesh Chandra Das, 2021. "Sectoral Compositions of Output and Employment in India: Are We Moving Towards Jobless, Job-loss or Job-enabled Growth?," Review of Market Integration, India Development Foundation, vol. 13(2-3), pages 98-123, December.
    3. Ramesh CHANDRA DAS & Kamal RAY, 2019. "Long Run Relationships And Short Run Dynamics Among Unemployment And Demand Components: A Study On Sri Lanka, India And Bangladesh," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(1), pages 107-120, June.
    4. Imade Yoga PRASADA & Aura DHAMIRA & Agus Dwi NUGROHO, 2021. "Effects Of Climatic Factors On The Productivity Of Smallholder Rubber Plantations In South Sumatra, Indonesia," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 109-121, June.
    5. Cahyadin, Malik & Sarmidi, Tamat, 2019. "The Impact of Foreign Direct Investment, Labour Force, and External Debt on Economic Growth in Indonesia and Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(1), pages 171-185.

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    More about this item

    Keywords

    wage; employment; policy; investment; economic growth;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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