The problem of child labour in Indonesia, although generally less prevalent than in other developing countries at a similar stage of development, is significant. As in other countries, this study finds a strong link between the child labour phenomenon and poverty, with the profile of child labour largely mirroring the profile of poverty. Furthermore, poverty is found to be an important determinant of whether children work. However, working does not always completely eliminate a child's opportunity to obtain formal education: children from poor households can still go to school by undertaking part-time work to pay for their education, implying that banning these children from working may force them to drop out of school instead. Since the phenomenon of child labour is strongly associated with and determined by poverty, the most effective policy for eliminating child labour is through poverty alleviation. Other policies that can foster the rate of reduction in child labour are those which make it easier for children from poor families to access education and increase the opportunity cost of working by improving the quality of education. Such policies will increase the rate of return to education.