Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia
Using survey data from the Indonesian manufacturing industry, this paper investigates the impact of minimum wage on employment and wages offered by Indonesian manufacturing firms from 1993 to 2006. It shows that the estimated effects of minimum wag...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2012/07/16534664/minimum-wage-affect-employment-evidence-manufacturing-sector-indonesia http://hdl.handle.net/10986/12000 |
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okr-10986-120002021-04-23T14:02:58Z Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia Del Carpio, Ximena Nguyen, Ha Wang, Liang Choon AVERAGE WAGE AVERAGE WAGES BALANCE SHEET ECONOMIC CONDITIONS ECONOMIC GROWTH EDUCATIONAL ATTAINMENT EFFICIENCY WAGE THEORIES EFFICIENCY WAGES EMPLOYEE EMPLOYMENT EMPLOYMENT EFFECT EMPLOYMENT EFFECTS EMPLOYMENT IMPACT EMPLOYMENT LEVEL EQUILIBRIUM WAGES EXPENDITURES FEMALE LABOR FEMALE PARTICIPATION FIRM LEVEL FIRM SIZE FIRM SURVEY FIRMS FORMAL SECTOR WORKERS HIGH WAGES HOUSEHOLD SURVEY INCOME INFORMAL EMPLOYMENT INFORMAL SECTOR INSURANCE INTEREST RATES JOB CREATION JOB GAINS JOB LOSSES JOB TURNOVER JOBS LABOR ECONOMICS LABOR FORCE LABOR MARKET LABOR MARKET CONDITION LABOR MARKET CONDITIONS LABOR MOVEMENTS LABOR PRODUCTIVITY LABOR RELATIONS LABOR STANDARDS LABOR SUPPLY LABOUR LABOUR MARKET LEVELS OF EDUCATION LITERATURE MALE WORKERS MANPOWER MANUFACTURING INDUSTRIES MANUFACTURING INDUSTRY MINIMUM WAGE MINIMUM WAGE HIKE MINIMUM WAGE HIKES MINIMUM WAGE LAW MINIMUM WAGES MONOPSONY MONOPSONY POWER MULTINATIONALS MULTIPLIER EFFECT NOMINAL WAGES OCCUPATION ON-THE-JOB TRAINING OPEN ACCESS PAID WORKERS PAPERS PREVIOUS RESULTS PREVIOUS STUDIES PRIMARY EDUCATION PRIMARY SCHOOL PRIMARY SCHOOL EDUCATION PRIMARY_EDUCATION PRODUCTION PROCESS PRODUCTION WAGES PRODUCTION WORKER PRODUCTION WORKERS PRODUCTIVITY LEVELS REAL WAGE RESEARCHERS SERVICE SECTOR SKILL LEVELS SKILLED WORKERS SMALL FIRMS SOCIAL POLICIES TERTIARY ENROLLMENT TERTIARY ENROLLMENT RATE TOTAL WAGE UNEMPLOYED UNEMPLOYMENT UNPAID WORKERS WAGE BILL WAGE DATA WAGE DISTRIBUTION WAGE EFFECT WAGE GAP WAGE GROWTH WAGE INCREASE WAGE INCREASES WAGE INEQUALITY WAGE LEVEL WAGE LEVELS WAGE POLICIES WAGE POLICY WAGE RATE WAGE RATES WOMEN WORKERS WORKER PRODUCTIVITY WORKERS YOUNG WORKERS Using survey data from the Indonesian manufacturing industry, this paper investigates the impact of minimum wage on employment and wages offered by Indonesian manufacturing firms from 1993 to 2006. It shows that the estimated effects of minimum wage on employment are positive within a province (i.e., with province fixed effects), but negative within a firm (i.e., with firm fixed effects), indicating the importance of using firm panel data to reduce the endogeneity bias in estimates. It finds significant heterogeneous effects of minimum-wage changes on employment. The employment effects of minimum wages are significant and negative among small firms and less educated workers, but not among large firms and workers with high school education and above. The negative employment impact is more severe for non-production workers than for production workers. The analysis also shows that the minimum wage disproportionally affects women: most of the non-production job losses are experienced by female workers. Lastly, the paper finds that the minimum wage is more correlated with the average wage of small firms than that of large firms, suggesting that minimum wages are more binding in small firms. 2012-12-21T19:37:32Z 2012-12-21T19:37:32Z 2012-07 http://documents.worldbank.org/curated/en/2012/07/16534664/minimum-wage-affect-employment-evidence-manufacturing-sector-indonesia http://hdl.handle.net/10986/12000 English en_US Policy Research working paper;no. 6147 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific Indonesia |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AVERAGE WAGE AVERAGE WAGES BALANCE SHEET ECONOMIC CONDITIONS ECONOMIC GROWTH EDUCATIONAL ATTAINMENT EFFICIENCY WAGE THEORIES EFFICIENCY WAGES EMPLOYEE EMPLOYMENT EMPLOYMENT EFFECT EMPLOYMENT EFFECTS EMPLOYMENT IMPACT EMPLOYMENT LEVEL EQUILIBRIUM WAGES EXPENDITURES FEMALE LABOR FEMALE PARTICIPATION FIRM LEVEL FIRM SIZE FIRM SURVEY FIRMS FORMAL SECTOR WORKERS HIGH WAGES HOUSEHOLD SURVEY INCOME INFORMAL EMPLOYMENT INFORMAL SECTOR INSURANCE INTEREST RATES JOB CREATION JOB GAINS JOB LOSSES JOB TURNOVER JOBS LABOR ECONOMICS LABOR FORCE LABOR MARKET LABOR MARKET CONDITION LABOR MARKET CONDITIONS LABOR MOVEMENTS LABOR PRODUCTIVITY LABOR RELATIONS LABOR STANDARDS LABOR SUPPLY LABOUR LABOUR MARKET LEVELS OF EDUCATION LITERATURE MALE WORKERS MANPOWER MANUFACTURING INDUSTRIES MANUFACTURING INDUSTRY MINIMUM WAGE MINIMUM WAGE HIKE MINIMUM WAGE HIKES MINIMUM WAGE LAW MINIMUM WAGES MONOPSONY MONOPSONY POWER MULTINATIONALS MULTIPLIER EFFECT NOMINAL WAGES OCCUPATION ON-THE-JOB TRAINING OPEN ACCESS PAID WORKERS PAPERS PREVIOUS RESULTS PREVIOUS STUDIES PRIMARY EDUCATION PRIMARY SCHOOL PRIMARY SCHOOL EDUCATION PRIMARY_EDUCATION PRODUCTION PROCESS PRODUCTION WAGES PRODUCTION WORKER PRODUCTION WORKERS PRODUCTIVITY LEVELS REAL WAGE RESEARCHERS SERVICE SECTOR SKILL LEVELS SKILLED WORKERS SMALL FIRMS SOCIAL POLICIES TERTIARY ENROLLMENT TERTIARY ENROLLMENT RATE TOTAL WAGE UNEMPLOYED UNEMPLOYMENT UNPAID WORKERS WAGE BILL WAGE DATA WAGE DISTRIBUTION WAGE EFFECT WAGE GAP WAGE GROWTH WAGE INCREASE WAGE INCREASES WAGE INEQUALITY WAGE LEVEL WAGE LEVELS WAGE POLICIES WAGE POLICY WAGE RATE WAGE RATES WOMEN WORKERS WORKER PRODUCTIVITY WORKERS YOUNG WORKERS |
| spellingShingle |
AVERAGE WAGE AVERAGE WAGES BALANCE SHEET ECONOMIC CONDITIONS ECONOMIC GROWTH EDUCATIONAL ATTAINMENT EFFICIENCY WAGE THEORIES EFFICIENCY WAGES EMPLOYEE EMPLOYMENT EMPLOYMENT EFFECT EMPLOYMENT EFFECTS EMPLOYMENT IMPACT EMPLOYMENT LEVEL EQUILIBRIUM WAGES EXPENDITURES FEMALE LABOR FEMALE PARTICIPATION FIRM LEVEL FIRM SIZE FIRM SURVEY FIRMS FORMAL SECTOR WORKERS HIGH WAGES HOUSEHOLD SURVEY INCOME INFORMAL EMPLOYMENT INFORMAL SECTOR INSURANCE INTEREST RATES JOB CREATION JOB GAINS JOB LOSSES JOB TURNOVER JOBS LABOR ECONOMICS LABOR FORCE LABOR MARKET LABOR MARKET CONDITION LABOR MARKET CONDITIONS LABOR MOVEMENTS LABOR PRODUCTIVITY LABOR RELATIONS LABOR STANDARDS LABOR SUPPLY LABOUR LABOUR MARKET LEVELS OF EDUCATION LITERATURE MALE WORKERS MANPOWER MANUFACTURING INDUSTRIES MANUFACTURING INDUSTRY MINIMUM WAGE MINIMUM WAGE HIKE MINIMUM WAGE HIKES MINIMUM WAGE LAW MINIMUM WAGES MONOPSONY MONOPSONY POWER MULTINATIONALS MULTIPLIER EFFECT NOMINAL WAGES OCCUPATION ON-THE-JOB TRAINING OPEN ACCESS PAID WORKERS PAPERS PREVIOUS RESULTS PREVIOUS STUDIES PRIMARY EDUCATION PRIMARY SCHOOL PRIMARY SCHOOL EDUCATION PRIMARY_EDUCATION PRODUCTION PROCESS PRODUCTION WAGES PRODUCTION WORKER PRODUCTION WORKERS PRODUCTIVITY LEVELS REAL WAGE RESEARCHERS SERVICE SECTOR SKILL LEVELS SKILLED WORKERS SMALL FIRMS SOCIAL POLICIES TERTIARY ENROLLMENT TERTIARY ENROLLMENT RATE TOTAL WAGE UNEMPLOYED UNEMPLOYMENT UNPAID WORKERS WAGE BILL WAGE DATA WAGE DISTRIBUTION WAGE EFFECT WAGE GAP WAGE GROWTH WAGE INCREASE WAGE INCREASES WAGE INEQUALITY WAGE LEVEL WAGE LEVELS WAGE POLICIES WAGE POLICY WAGE RATE WAGE RATES WOMEN WORKERS WORKER PRODUCTIVITY WORKERS YOUNG WORKERS Del Carpio, Ximena Nguyen, Ha Wang, Liang Choon Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia |
| geographic_facet |
East Asia and Pacific Indonesia |
| relation |
Policy Research working paper;no. 6147 |
| description |
Using survey data from the Indonesian
manufacturing industry, this paper investigates the impact
of minimum wage on employment and wages offered by
Indonesian manufacturing firms from 1993 to 2006. It shows
that the estimated effects of minimum wage on employment are
positive within a province (i.e., with province fixed
effects), but negative within a firm (i.e., with firm fixed
effects), indicating the importance of using firm panel data
to reduce the endogeneity bias in estimates. It finds
significant heterogeneous effects of minimum-wage changes on
employment. The employment effects of minimum wages are
significant and negative among small firms and less educated
workers, but not among large firms and workers with high
school education and above. The negative employment impact
is more severe for non-production workers than for
production workers. The analysis also shows that the minimum
wage disproportionally affects women: most of the
non-production job losses are experienced by female workers.
Lastly, the paper finds that the minimum wage is more
correlated with the average wage of small firms than that of
large firms, suggesting that minimum wages are more binding
in small firms. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Del Carpio, Ximena Nguyen, Ha Wang, Liang Choon |
| author_facet |
Del Carpio, Ximena Nguyen, Ha Wang, Liang Choon |
| author_sort |
Del Carpio, Ximena |
| title |
Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia |
| title_short |
Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia |
| title_full |
Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia |
| title_fullStr |
Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia |
| title_full_unstemmed |
Does the Minimum Wage Affect Employment? Evidence from the Manufacturing Sector in Indonesia |
| title_sort |
does the minimum wage affect employment? evidence from the manufacturing sector in indonesia |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2012/07/16534664/minimum-wage-affect-employment-evidence-manufacturing-sector-indonesia http://hdl.handle.net/10986/12000 |
| _version_ |
1764418629937397760 |