Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia

Del Carpio, Ximena ; Nguyen, Ha ; Wang, Liang Choon

World Bank, Washington, DC

关键词: AVERAGE WAGE;    AVERAGE WAGES;    BALANCE SHEET;    ECONOMIC CONDITIONS;    ECONOMIC GROWTH;   

DOI  :  10.1596/1813-9450-6147
RP-ID  :  WPS6147

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Using survey data from the Indonesianmanufacturing industry, this paper investigates the impactof minimum wage on employment and wages offered byIndonesian manufacturing firms from 1993 to 2006. It showsthat the estimated effects of minimum wage on employment arepositive within a province (i.e., with province fixedeffects), but negative within a firm (i.e., with firm fixedeffects), indicating the importance of using firm panel datato reduce the endogeneity bias in estimates. It findssignificant heterogeneous effects of minimum-wage changes onemployment. The employment effects of minimum wages aresignificant and negative among small firms and less educatedworkers, but not among large firms and workers with highschool education and above. The negative employment impactis more severe for non-production workers than forproduction workers. The analysis also shows that the minimumwage disproportionally affects women: most of thenon-production job losses are experienced by female workers.Lastly, the paper finds that the minimum wage is morecorrelated with the average wage of small firms than that oflarge firms, suggesting that minimum wages are more bindingin small firms.