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

Author

Listed:
  • 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)

  • SWETA C. SAXENA

    (Gender, Poverty and Social Policy Division, United Nations Economic Commission for Africa, Addis Ababa, Ethiopia)

  • ALEXANDER M. TJAHJADI

    (Intelligence Unit, Think Policy Indonesia, Jakarta, Indonesia)

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.

Suggested Citation

  • Dyah Pritadrajati & Nurina Merdikawati & Sweta C. Saxena & Alexander M. Tjahjadi, 2024. "Minimum Wage and Educational Pathways in Indonesia: General or Vocational Tracks?," Asian Development Review (ADR), World Scientific Publishing Co. Pte. Ltd., vol. 41(02), pages 107-135, September.
    • Handle: RePEc:wsi:adrxxx:v:41:y:2024:i:02:n:s0116110524400110
    DOI: 10.1142/S0116110524400110
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    More about this item

    Keywords

    general education; minimum wage; senior secondary school choice; vocational education;
    All these keywords.

    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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