Minimum Wages

Poverty and Inequality Analysis
Monitoring, Evaluation and Learning
Policy Research

Welcome to the first edition of the SMERU Newsletter in our second year as an independent organization. This edition focuses on various issues concerning the determination of minimum wages. From April to Oktober 2001, SMERU conducted a major study in this area, using both qualitative and quantitative approaches. A summary of the main findings of our work is presented in this edition. The qualitative study mainly concentrated on reviewing how the minimum wage regulations are viewed, interpreted, and implemented by both firms and workers, while the quantitative study examined the impact of minimum wages on employment using data from the National Labor Force Survey (Sakernas).

To increase our understanding of minimum wages and to place the issues in a broader context, we have invited Dr. Chris Manning, who for many years has been examining labor issues in Indonesia, to write a short overview of minimum wage policy. His article raises several important issues, in particular the tendency in Indonesia to treat minimum wages solely as a social issue while neglecting the economic consequences.

In the context of recent political reform in Indonesia, another fundamental issue is the relationship between minimum wages and regional autonomy. In the past, the central government issued regional minimum wage regulations drawing on recommendations fromthe governors in the regions. But now that the power to set minimum wages has beentransferred directly to the regional governments themselves, we need to consider the consequences of this change. A contribution from our Decentralization and Local Government Division seeks to discuss some of these dimensions.

The issue of minimum wages remains controversial. By raising some of these concerns here, we hope to provide some insights which may help our readers to consider the merits of government policy in this important area. We wish everyone a Happy New Year

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