Do Minimum Wages Reduce Employment and Training?

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Economics and REsEaRch dEpaRtmEnt

d mu Wge

Reue Elye

trg?

Guntur Sugiyarto and Benjamin A. Endriga

May 2008

RD WoRking PaPER SERiES no. 113


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ERD Wrin Paper N. 113

Do MiniMuM Wages ReDuce eMployMentanD tRaining?

Guntur SuGiyartoand Benjamin a. endriGa

May 2008

Guntur Sugiyarto is Economist in the Development Indicators and Policy Research Division, Economics and ResearchDepartment, Asian Development Bank; Benjamin A. Endriga is Assistant Proessor at the College o Economics and

Management, University o the Philippines Los Baos. The authors thank Rana Hasan and Aashish Mehta or useul

comments, and Eric B. Suan and Gemma Estrada or research assistance. The paper also beneted rom discussions

with some colleagues in the Asian Development Bank as well as with key government ocials and labor union leaders

in Indonesia. An earlier version o the paper was presented in December 2007 at the International Symposium on

Contemporary Labor Economics, University o Xiamen, Peoples Republic o China. The authors also thank the symposium

participants or their valuable comments.


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Asian Deepment Bank6 ADB Aene, Mandan Cit

1550 Metr Mania, Phiippineswww.adb.r/ecnmics

2008 b Asian Deepment BankMa 2008

ISSN 1655-5252

The iews epressed in this paperare thse the athr(s) and d ntnecessari reect the iews r picies

the Asian Deepment Bank.


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FoREWoRD

The ERD Wrkin Paper Series is a rm r nin and recent cmpetedresearch and pic stdies ndertaken in the Asian Deepment Bank r n

its beha. The Series is a qick-disseminatin, inrma pbicatin meant tstimate discssin and eicit eedback. Papers pbished nder this Seriescd sbseqent be reised r pbicatin as artices in pressina jrnasr chapters in bks.


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CoNtENts

Abstract ii

I. INTRoDuCTIoN 1

II. RATIoNAlE o THE MINIMuM WAgE PolICy 2

III. MINIMuM WAgE PolICy IN INDoNESIA 3

Iv. lITERATuRE REvIEW 5

A. Minimm Wae Eects acrss Cntries 5 B. Minimm Wae Eects in Indnesia 7 C. lee and Bindin Aspects the Minimm Wae 8

v. MoDEllINg DEvEloPMENT AND DATA uSED 10

A. Deepin the Mde 10 B. Minimm Wae variabe used in the Mde 11 C. Testin the vaidit the Minimm Wae variabe 12 D. Data Srce 14 E. Data n Empment and Trainin 14

vI. ESTIMATIoN RESulTS 17

A. Minimm Wae and Empment 17 B. Minimm Waes and Trainin 20

vII. CoNCluSIoNS AND PolICy IMPlICATIoNS 23

APPENDIx: EMPloyMENT REgRESSIoNS 25

APPENDIx:TRAININg REgRESSIoNS 29

REERENCES 31


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AbstRACt

This paper eamines minimm wae eects n empment and traininprisin r aris wrkers in dierent kinds frms sin niqe frm-ee

data. The rests shw neatie eects n nskied wrkers bt nt n skiednes, with the aderse eects mre seere in sma frms. Minimm waes asredce in-hse trainin r nskied wrkers whie the eects n skied wrkersare mied.

The fndins sest that hain been rced t pa hiher waes becase

bindin and increasin minimm waes, frms redce hirin and trainin nskied wrkers, eain them nemped and ntrained. This shd be

tmst cncern as frms seem t adpt a shrt-term pic at a n-term cst rnskied wrkers, rther eacerbatin nempment and pert. Mreer, thecrcia re frm characteristics in determinin the aderse eects minimm

waes has raised reseratins reardin preis stdies that hae sed data rmhsehd r abr rce sres, which d nt take this isse int accnt.


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I. INtRoDuCtIoN

The minimum wage has put a sense o equality back into workers

relationship with their employer. Wages are supposed to be a air refection o

an employees eorts, but or too long wages were a point o exploitation

what could an employer get away with. In very simplistic terms this put a

pressure to keep low-paid wages low. With the minimum wage, this downward

pressure is at least partly removed.

BBC News (2005)

The reeance and efcac minimm wae reatins are a persistent isse amn picmakers.The ke qestin is whether the impementatin and therere the increase in minimm waes wi

aderse aect the empment prspects r chances w-skied wrkers, i.e., the rp wrkers that minimm wae reatins aim t hep. These wrkers earn arnd the minimm waes that an chanes in the rate ma aect their incme and een their empment.

Anther imprtant isse is detrainin, whereb minimm waes aect trainin prided bfrms. I frms are rced t pa hiher waes de t the hih and bindin minimm wae, ratinaand prft-maimizin frms can react b redcin their ther wrker-reated epenses, incdin

acatins r in-hse trainin. irms can as disemp, r chse t recrit ess r een a nskied wrkers and hire mre skied wrkers t redce era abr csts and aeiate the

pressre t pride trainin.The minimm wae eects n empment and trainin ths hae repercssins n era

wae and incme distribtin and, hence, pert. The mst reeant qestin here is, therere,wh acta benefts rm the settin minimm waes.

The main prpse this std is t eamine the eects minimm waes n empmentees and trainin r dierent tpes wrkers with Indnesia as a case std. The std sesniqe frm-ee data and cnsiders dierent tpes frms, bsiness sectrs, as we as mdeinspecifcatins. rther eaminatin eprt rientatin, rein wnership, and frm size t

sbstantiate the eects minimm waes is as carried t t shw hw frm characteristicshae, t sme etent, inenced the aderse eects minimm waes.

In Indnesia, the atest trend in abr market picies has becme increasin pr-abr, and

the minimm wae has becme ne the main isses in the pic debate, makin Indnesia aninterestin and imprtant case std. Increasin abr prtectin with minimm waes and seerancepa, aainst a backdrp persistent risin nempment despite ecnmic recer ater the

Asian fnancia crisis, is a majr isse. The increase in the minimm wae in Indnesia has beenare hiher than the rwth inatin and abr prdctiit, and the seerance pa sstemhas becme ne the mst epensie in Asia (Mannin 2003 and Siart et a. 2006).


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The std ses mtipe reressin anases takin int accnt the dierences in the frmstpes and sizes, as we as indstr sectrs. Reressin anases r skied abr are as cndctedt ain insihts n the pssibiit empers sbstittin skied wrkers r nskied nes whenminimm waes rise. Mre reressin anasis r sbsampes dierent tpes frms sch as

eprters and nneprters, dmestic and rein, and dierent-sized frms are as perrmed trther eamine the re frm characteristics in determinin minimm wae eects.

Sectins II t Iv reiew the empirica iteratre n the isse, incdin preis stdies n

the minimm wae in Indnesia. Sectin v prides discssins the data and empirica mdessed in this std. Sectin vI presents the estimatin rests r bth empment and traininreressins. Sectin vII cncdes the std b smmarizin the main fndins and sme discssins

n the pic impicatins and ke chaenes r the tre.

II. RAtIoNAlE oF tHE MINIMuM WAgE PolICy

Minimm wae r wae-r reatins are enrced main n the rnds scia jstice,i.e., t raise incmes pr r near-pr amiies whse members are receiin waes arnd theminimm ee. The reatins are part scia prtectin picies t shied the west-paid wrkers

aainst pssibe aderse eects rm abr market imperectins and abses prft-maimizincapitaists. This prtectin is in ine with Internatina labr oranisatin (Ilo) CnentinN. 26, which prtects nerabe wrkers rm hain their waes rced dwn r maintained ateceptina w ees b empers wh are in a strner psitin t determine waes.

Prpnents the minimm wae pic are that it maintains iin standards and prtectsthe pr. The pic, the sa, cd ths be an eectie t r pert aeiatin, especiain deepin cntries where scia prtectin picies r wrkers and the pr are nt we

deeped. The as make a case that the minimm wae des nt hae a sinifcant disempmenteect, nr des it hae a neatie eect n rine benefts t w-wae wrkers (Simn andKaestner 2003 and Saet 2006). Stdies shw that minimm wae increases hae neiibe eects

n empment r een ead t an increase in the empment w-wae wrkers (Katz 1991,Katz and Kreer 1992, Card and Kreer 1993). Mreer, the as are that the disempmenteects the minimm wae n presme a zer-rwth ecnm, where there is n cmpensatindemand stims that can ni the neatie empment eects a rise in the minimm wae

abe the market cearin ee (Isam and Nazara 2000).

Critics, n the ther hand, emphasize the efcienc sses the minimm wae that can restin disempment and ther aderse eects. Minimm wae reatins distrt the abr market,

creatin neatie eects n the ecnm. The as cite eidence that the aderse empmenteects minimm waes are acta sinifcant (Nemark and Wascher 1991, 1994a, 1994b, 1995,and 1999). rthermre, the are that the n pasibe reasn r the minimm wae is t

redistribte incmes rm capitaists t w-skied wrkers; nrtnate, the minimm wae is a

crde instrment r din this. A minimm wae prides sme w-skied wrkers hiher waes,hweer, its disempment eects as make ther wrkers receie zer saaries.1 In additin, i

1 rm the asmmetric inrmatin iteratre pint iew, it can be ared that capitaists shd be better inrmed

than w-skied wrkers s that an additina demand rm the atter arisin rm minimm wae reatins canstimate capitaists t prtect their interests. Mreer, frms can as respnd t minimm wae increases b makin

wrkin cnditins mre difct. In this ramewrk, jbs with difct wrkin cnditins are better paid and wrkerswi hae dierent preerences r wrkin cnditins. In the absence minimm wae reatins, the frm wd

May2008

Do MiniMuM WagesReDuce eMployMentanD tRaining?

guntuR sugiyaRtoanD BenjaMina. enDRiga


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section iii

MiniMuM Wagepolicyin inDonesia

the minimm waes are set wer r n wrkers, this can encrae frms t hire w-skiedteenaers r n-adt wrkers t repace w- r hih-skied adt wrkers. This wi decreasesch enrment and disrpt enera incme distribtin witht chanin the empmentee. Incme distribtin wrsens becase the repaced adt wrkers are mre ike t be the

breadwinners w-incme amiies, whie the new recrited teenae wrkers are main members better- amiies.

Minimm wae aws can as encrae pepe t think that w waes are mere the at

prft-seekin empers r capitaists, whie w waes can acta rest rm wrkers wskis and edcatin. In this cntet, minimm wae reatins can redce wrkers incentie tacqire mre skis and edcatin since the ee prtected and receie hiher waes anwa.

Theretica, minimm waes can cnstrain empment, especia in the cntet acmpetitie abr market. A minimm wae set abe the eqiibrim price, r instance, wi eadt jb ratinin and pen nempment. under a mnpsnistic settin, hweer, this cnditin

can be reersed. With emper pwer, frms can pa wrkers ess than their marina prdct,which is eqa t the market-cearin ee waes in a cmpetitie abr market. T sme deree,

the mnpsnistic abr market can increase bth waes and empment at the same time.

In practice, minimm wae reatins are a cmmn mde ernment interentin in theabr market. This is part de t the pbics enrms spprt r the pic and the ernmentserts t aid bein abeed anti-abr, which can be pitica cst. The minimm wae, rinstance, has becme a smb decenc and airness (Tn Bair as qted b BBC News 2005)

and mtiatera instittins sch as the Ilo hae as spprted the minimm wae pic as at t address incme ineqait and t impre wrkers iin standards.

The frst natina minimm wae aw was enacted b New Zeaand in 1896, wed b Astraia

in 1899 and the united Kindm in 1902 (Wikipedia 2008). A nmber deepin cntries inAsia hae as intrdced minimm wae reatins as part their indstria picies. Amn theeariest, r instance, is Sri lankas 1927 Minimm Wae ordinance. The sbseqent impressie

deepment minimm wae sstems in man cntries reects their particar histrica andinstittina deepment. Minimm waes in the Pepes Repbic China, Indnesia, Japan,Phiippines, and Thaiand, r instance, hae been decentraized, whie Repbic Krea and vietNam each hae a sine rate. In Cambdia, the minimm wae is n r wrkers in the arment

and tetie sectr, which is in cmpete cntrast with India where the rates ar b state, sectr,and ccpatin (lee 2007, Saet 2006, and eipe and Hasan 2006).

III. MINIMuM WAgE PolICy IN INDoNEsIA

Indnesia was arab the wrst hit b the 1997 Asian crisis. rm 1991 t 1996, the cntrs

rea gDP rwth rew b 7.8% n aerae win t rapid increases in inestments and eprts,

which rew b 10.4% and 9.4% anna. The crisis ertrned that crse and the ecnm wasnabe t recer.

Man actrs hae cntribted t the sw recer. Ecnmic epansin ater the crisis wasdrien mst b cnsmptin, creatin n sinifcant additina empment. The weak inestment

nt reqire wrkers wh preer ihter wrkin cnditins t wrk harder, becase it wd hae t cmpensate them

r that. With the intrdctin a minimm wae, the frm wi reqire them t wrk harder t cmpensate r thehiher waes. See raja (1999) r an eampe the se the ramewrk.

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cimate discraed crrent and ptentia inestrs, whie the enth and cst prcess dinbsiness, widespread crrptin, and ncertainties and irrearities in the taatin and abr marketpicies rther hindered inestments (ADB 2005). Therere, despite the ernments erts tincrease inestments, the inestment rates ater the crisis remained w ater a massie cntractin

33% in 1998. The inestment ee prir t the crisis, r eampe, was abt 30% gDP, whiethe present ee inestment is n arnd 16% (ADB 2007).

The Indnesian abr market has had t endre the neatie repercssins the crisis. open

nempment and nderempment hae been increasin drin this perid. The ernmentshea reiance n ecnmic rwth t prmte empment and abr market picies that seem tcnstrain, rather than aciitate jb creatin, hae made it er difct t impre abr market

cnditins. Cnstrainin abr market reatins incde the minimm wae, which has becmemre prbematic especia ater its decentraizatin in 2001.

Minimm wae fin in Indnesia was frst intrdced in 1956, and the Natina Wae Cnci,

which is in chare settin minimm waes, has been peratin since 1969 (Saet 2006b). Eachprince has its wn reina r princia wae cnci that determines the minimm wae ee.

In the 1970s, minimm wae reatins were impemented with itte ernment interentin,especia in determinin the minimm wae. In the 1980s, hweer, minimm wae reatin

became an imprtant pank the ernments abr pic. Since then, reina minimm waeswere set and pdated anna based n the cst the cmmdit bnde deemed necessar ra particar wrker.

Man, hweer, cnsidered that minimm wae ees in the 1970s and 1980s were set tw, bew the market cearin ee (see, e.., Rama 2001). The minimm waes in these peridswere mere smbic, t aid pssibe abr epitatin.2 This sitatin is in cntrast with the

cnditin that bean in the frst ha the 1990s when minimm waes were triped in nminaterms and mre than dbed in rea terms. In the secnd ha this decade, the nmina ratescntined t increase bt nt necessari in rea terms since inatin as increased. Drin 2000

t 2002, the minimm waes increased r three cnsectie ears and, b the end 2002, therates in rea terms breached their pre-crisis ees in 1997 (Srahadi et a. 2003).

Sme hae raised cncerns that the increasin minimm wae has rther wrsened thenempment prbem, which has been increasin since 2000 with weak inestments rm a

deteriratin inestment cimate ater the ecnmic crisis. Mreer, decentraizatin in Indnesiasince 2001 has rther cmpicated the isse, creatin aderse eects n the inestment cimate.Decentraizatin is sppsed t prmte ke principes reina atnm, ernment accntabiitand transparenc, ecnmic efcienc and eectieness, and eqitabe access t serices. Hweer,

the hast and bi-ban apprach decentraizatin in Indnesia has cntribted t the wrsenin sme main aspects the inestment cimate sch as creatin mre ncertainties and crrptin(ADB 2005).

Decentraizatin has transerred athrit rm natina t reina and ca ernments,incdin the pwer t determine isses n minimm waes and ther abr and hman resrcepicies. As a rest, abr market tcmes ar acrss reins and t sme etent becme dependent

n the ste and eadership capabiities the reina and ca eaders. 3 unrtnate, imitedresrces and capacit cnstrain reina and ca ernments in carrin t a their decentraized2 Inrmatin rm ke ernment fcias in Indnesia.Inrmatin rm ke ernment fcias in Indnesia.3 Discssins with sme ke ernment fcias in Indnesia.in Indnesia..

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section iV

liteRatuReReVieW

respnsibiities. The Ministr Manpwer and Transmiratin is ne (thh nt niqe) departmenteperiencin sch cnstraints. The reina fces this ministr were detached rm the centrafce and attached t dierent ca instittins nder dierent names and nctins witht cearmandates and jb descriptins. Cnseqent, there has been sme cnsin abt their res in

the ca instittins. The aderse eects this ambiit are eident in, r eampe, the hat inatherin abr market statistics rm sme reins, makin pannin and ther reated actiitiesmre prbematic.

Iv. lItERAtuRE REvIEW

A. Minimm Wae Effec acr Cnrie

Mst stdies fnd that minimm waes hae disempment eects, particar amn nskied-

teenae and n-adt wrkers. Abwd et a. (1997 and 1999) sed it mdes t std theminimm wae eects in rance and the united States (uS), and nted that the minimm wae hasare neatie eects n empment. The eects are mid in enera bt er strn n wrkersemped at the minimm wae ee. r instance, a 1% increase in the minimm wae redces

the chance jb retentin b 2.5% in rance and 2.2% in the uS r n maes. Nemark andNizaa (2004) estimated the nrn eects minimm waes in the uS and nd that aswrkers reach their 20s, the wrk ess the ner the are epsed t a hiher minimm wae. Theirstd as nd that minimm wae eects are mre sinifcant r Arican-American wrkers.

A series papers b Nemark and Wascher emped dierent appraches and datasets, andenera nd neatie empment eects with the minimm wae. usin pane data at the state

ee in the uS, the nd that the estimates teenae and n empment ppatin ratise win the minimm wae increase (Nemark and Wascher 1991). Mreer, sin a cnditinait mde empment and enrment tcmes r teenaers and data r 19771989, theshwed a neatie eect minimm waes n sch enrment, a psitie eect n teenaers

neither emped nr in sch, and emper sbstittin hiher-skied r wer-skied teenaewrkers (Nemark and Wascher 1994a). rthermre, empin a diseqiibrim apprach with anendens switchin reressin t measre disempment eects, their tw-reime cmpetitieand three-reime mnpsn mdes ieded sinifcant neatie eects minimm waes n

empment, and the rests were cnsistent when matched with the Crrent Ppatin Sre inthe uS (Nemark and Wascher 1994b).

usin a mtinmia it mde, Nemark and Wascher (1995) shwed that hiher minimm

waes hae sma bt sinifcant neatie eects n empment. Minimm waes hae as raisedthe prbabiit that hiher-skied teens eae sch t dispace wer-skied wrkers rm their jbs.In their ater std, the estimated ped time-series crss-sectin reressins 16 cntries

the oranisatin r Ecnmic C-peratin and Deepment sin data r 19751997 and nd

simiar rests (Nemark and Wascher 1999). The as nd that the disempment eects tendt be smaer when there are sbminimm wae prisins r th, and mre seere when waesare set b cectie barainin areements incdin ernment picies that restrict emper

erts t ar wrkin hrs in respnse t wae increases.

other stdies r sme latin American cntries as nd strn aderse empmenteects minimm waes. reeman and reeman (1991), r instance, nd that the minimm

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wae impementatin in Pert Ric sbstantia wered empment, atered abr acatinacrss indstries, and had massie eects n earnins distribtin. Simiar rests were btainedb Mane and Mendez (2003).

A cmparisn acrss cntries shws that the disempment eects minimm waes in

latin America are strner than in indstria cntries. This is becase the abr markets in latinAmerica are mre riid, makin the trade- between eects n pert and redced eibiitmre seere. Kreer (1994) as nd that the aderse empment eects are strn in time

series stdies, whie the weakest eidence cmes rm crss-indstr anases.

usin the same data set in the std b Nemark and Wascher (1992), Card et a. (1993) hweer

nd n disempment eects teenae wrkers. The ared that the disempment eectsnd in the earier std ma be attribted t an errr in the defnitin sch enrment rate.Mreer, appin ne earaed estimates in the mdein specifcatin as shwed n aderseempment eects. other stdies as epress sme skepticism abt the disempment eects

minimm waes. Bschen and grssman (1981) nd that the minimm wae pic did nt aectareate empment r aerae waes. Stdies b Katz (1991) and Katz and Kreer (1992) sin

a nitdina sre frms in the ast-d indstr in Teas (1991 and 1992) and New Jerse(1993) as nd n disempment eects arisin rm the minimm wae. In act, empment

impred reatie amn thse frms ike t be aected b minimm wae increases.4

In estimatin the eects the uS edera minimm wae increase in 1990, Card (1992)nted that the increase in the minimm wae raised teenae waes, bt there was n eidence

a redctin in teenae empment. Mreer, Simn and Kaestner (2003) nd that there wasn eect minimm wae increases n rine benefts t w-wae wrkers, and that the restswere aid whether sin edera- r state-ee ariatins in the minimm wae data.

on the direct ink between minimm waes and pert, Nemark and Wascher (1997) ndthat minimm wae increases tend t redistribte incme amn w-incme amiies rather thanrm the hih- t w-incme hsehds. Tw stdies b Nemark et a. (1998 and 2000) as

nd neatie distribtina eects minimm waes. Whie minimm waes raise the incme sme pr amiies, the as increase the prprtin pr and near-pr amiies. Their stdin 2000 nd that whie waes w-wae wrkers increase, their hrs wrked and empmentdecine s that the net eect is a decine in their incme. These fndins sest that the minimm

wae is nt a d pic t r pert redctin. As, in cnsiderin the aternaties t theminimm wae, the incme ta credit was nd t be mre benefcia r pr amiies than theminimm wae (Nemark and Wascher 2000).

Saet (2001) btained insinifcant disempment eects rm minimm waes. Perrminreressins n a sampe seected deepin cntries in Nrth and Sb-Saharan Arica, latinAmerica, and Asia (Indnesia nt incded), Saet nd that the minimm wae has an insinifcant

eect n empment ee, and a neatie and sinifcant eect n pert ee. This sests

that minimm waes can be an eectie t r pert redctin in deepin cntries.

Bird and Mannin (2005) nted, hweer, that n 17% the minimm wae increase in

Indnesia in 2003 went t pr amiies, 34% t near-pr, and ha the benefts accred tnnpr amiies. Assmin n jb sses, their std nd that the minimm wae pic is nteectie in beneftin the pr.

4 It shd be nted, hweer, that the astd indstr was bmin in the tw states at the time the

stdies, nderminin the minimm wae eects.

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b. Minimm Wae Effec in Indneia

Siart et a. (2006) nted that the Indnesian ernment picies tward the abrmarket hae shited rm bein repressie tward abr nins and bein pr-emper, t arin

abr nins and bein pr-wrker. This was part de t the internatina pressre t impreabr standards in deepin cntries, which ed t abr-riend picies in the 1990s. Thiswas strenthened drin decentraizatin since 2001. Sch pr-abr picies incde ree creatin abr nins, intrdctin new minimm waes and scia secrit; and prmtin abr

rihts n wrkin hrs, discriminatin, chid abr, retrenchments and seerance pa, cntract, andccpatina heath and saet. In 2000, r instance, Indnesia became the frst cntr in Asiat adpt a Ilo cnentins n abr, incdin n minimm waes, indstria dispte restinsstem, wrkin hr imitatin, ertime pa, seerance pa, and eaes pertainin t maternit,

iness, and hidas.

Erts t raise abr standards as rested in passin the Manpwer Prtectin Act 2003 inwhich the minimm waes are reated. Amn thers, the Act arantees minimm wae anna

reisins thrh princia ernment decrees based n district ernments recmmendatins

and wae criteria r a decent standard iin (Mannin 1993). unti 2000, reina minimmwaes were estabished b decree issed b the Ministr Manpwer and Transmiratin. The

prcess started rm the recmmendatins princia tripartite cncis (with representaties rmempees, empers, and ernment) then t princia ernrs bere reachin the minister.With decentraizatin and mre reina atnm since 2001, the pwer t set minimm waes hasbeen shited t ernrs, mars, and reents, based n recmmendatins rm tripartite cncis.

This chane has rested in sinifcant increases in the minimm wae, witht reard t chanesin the wrkers prdctiit and enera price, and mre abr disptes.5

Whie we-intentined, sch picies as ed t cnterprdctie rests. The chane in the

pwer baance between emper and empee has rested in arbitrar increases in the minimmwae reardess prdctiit rwth and risin abr csts. Minimm wae increases that hae

ths been hiher than bth inatin and wrkers prdctiit cped with the seerance pa sstemhae becme ne the mst epensie in the Asia and Pacifc rein. As a rest, ecnmic rwthin 20002003 was characterized b decinin inestments and cincided with risin nempmentand abr csts. Jbs in the manactrin sectr e b 9.8% whie abr csts were 35% hiherthan prir t the Asian crisis (Siart et a. 2006).

Rama (2001) estimated empment eects minimm waes b defnin the wae ariabein dierent was, i.e., as a rati t aerae wae, r t abr csts r ae added per wrker. Hismain fndin was that there was n neatie eect n areate empment and that dbin

the minimm wae in Indnesia redces rban wae empment b 05%. Disareatin thereressins b frm size ieds dierent rests: sinifcant disempment eects r sma frmsbt psitie eects n are frms.

Aatas and Camern (2003) nd disempment eects minimm waes in the cthin,tetie, twear, and eather indstries. Their std adpted Card and Kreers methd sin

5 on the cncern abt the hih and increasin minimm waes in Indnesia despite the ack abr prdctiit

imprement, abr nins hae resed t be respnsibe, reerrin instead t the act that machiner and thercapita eqipment crrent in se are d and bsete since there hae been n new inestments ater the crisis.

Accrdin, Indnesian wrkers with the same ski ee and in the same sitatin wi neer be abe t cmpetewith their cnterparts rm ther cmpetin cntries r their cmpetitrs enj better and newer eqipment that

wi increase their prdctiit (Siart et a. 2006 and based n discssins with sme abr nin eaders).

section iV

liteRatuReReVieW



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dierence-in-dierence and appied micr-ee data in the astd indstr in New Jerse, uS.This methd can aid mde specifcatin prbems inherent in reressin-based rests, whichcan be hih mde-specifc and cd enerate skepticism abt the acta minimm wae eectsn empment.

Srahadi et a. (2003) as had simiar fndins n the minimm wae impact in the rbanrma sectr in Indnesia. usin data mst taken rm the Natina labr rce Sres (Sakernas),the athrs nd that minimm waes hae aderse eects n the empment nskied wrkers

bt n eects n white-car wrkers. The neatie impacts n emae, n, ess-edcated,-time and part-time wrkers were as sinifcant. The reressin rests shwed that a 10%increase in rea minimm waes redces tta empment b mre than 1%, i.e., an easticit

0.11. The empment easticities minimm waes r emae wrkers were 0.31, ess-edcatedwrkers 0.20, -time wrkers 0.09, and part-time wrkers 0.36. r white car wrkers, theeasticit was psitie at 1.00 and statistica sinifcant, indicatin that these wrkers beneft rmminimm wae increases. Their rests sest that the neatie empment eects minimm

waes are brne amst entire b rps mst nerabe t chanes in abr market cnditins,rcin them int the inrma sectr t take n wer pain jbs with prer wrkin cnditins.This fndin seems in ine with the nempment cnditin in Indnesia, which is mst preaentamn wmen, th, and nedcated, and which takes pace anside the increasin trend

wrkers retrnin t arictre and the inrma sectr (Siart et a. 2006).

Mannin (2003) nd that the hih ees minimm waes in Indnesia hae pt pressren aerae waes, increasin wae csts and redcin empment sinifcant. He rther ared

that sch minimm wae ees are damain Indnesias cmparatie adantae in abr-intensieindstries. Mannin (2003) rther pinted t that the minimm wae pic has paed a crciare in keepin rma sectr waes abe market-cearin ees at the epense jbs in the

rma sectr. Rea indstria waes in are and medim estabishments rse astest ater the Asiancrisis, reachin abt 50% hiher than pre-crisis ees b ate 2004.

C. lee and bindin Apec f he Minimm Wae

Tw crcia isses nderin the rests eaminin minimm wae eects are whetherthe minimm wae is rea abe the market cearin ee and i minimm wae reatins

are bindin r a frms. unrtnate, man stdies n minimm wae eects hae taken theseisses r ranted, basica assmin that the minimm wae rate is awas abe the marketcearin ee and that a frms cmp with reatins b pain their wrkers abe the minimm

wae. These assmptins are cnsistent with the standard anasis n minimm wae eects nempment ee.

In the standard mde, the minimm wae is assmed t be abe the market cearin ee

and there is n cmpiance isse. As in a cmpetitie wrd, the market cearin ee eqas

the marina prdctiit wrkers, ire 1 panes (a) and (b) represent the minimm waeeects n empment rm which the win cncsins can be drawn:

(i) Minimum wages will cause unemployment. Settin the minimm wae abe the marketcearin ee at W1 in ire 1 pane (a), r instance, wi redce abr demand rmE* t E1, creatin nempment (l1 E1).

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(ii) The higher the minimum wage, the more unemployment there will be. rm the ire 1pane (a), i the minimm wae is rther increased t W2, nempment is as increasedt (l2 E2). Ntice that (l2 E2) is arer than (l1 E1).

(iii) Increasing the minimum wage will encourage workers to move into the protected sector,

in which the minimum wage is imposed. This is impicit in the pward spe the abrspp cre.

(i) For any given minimum wage rate, the more elastic the demand or labor, the larger theminimum wages unemployment eect will be. In ire 1 pane (b), demand cre D2is mre eastic than D1. r a ien minimm wae W and abr spp cre S, the

nempment eect minimm wae is reater r demand cre D2 than D1, whichis shwn b (l E2) is reater than (l E1).

(a) (b)

FIGURE 1

STANDARD ANALYSIS OF THE EMPLOYMENTEFFECTS OF MINIMUM WAGE

Wage Wage

S

D

Labor

W2

W1

W

W1

W

E2

E1

E* L1

LaborE2E1E* LL

2

S

D1

D2

Source: Authors summary.

unrtnate, the assmptins that minimm waes are awas abe the market cearin

ee and that frms awas cmp with reatins impicit assmed in the standard mde arent awas tre. Therere, the standard anasis depicted in the ire 1 is nt awas aid.

As discssed, man cnsidered the minimm waes in Indnesia in the 1970s and 1980s asbew the market cearin ee and as serin n as a benchmark t aid abr epitatin.In this cnditin, whether the minimm wae reatin is bindin r nt is rea nt imprtantas mst frms paid their wrkers abe the minimm wae anwa.

on the ther hand, i the minimm wae is abe the market cearin ee, i.e., hiher

than the marina prdctiit abr in the cmpetitie market, then the bindin isse r theenrcement minimm wae reatins becmes er imprtant. Tw pssibe scenaris arise:

frst, the minimm wae is nt bindin r nt enrced, and, secnd, the minimm wae is bindinr is enrced. In the frst case, the minimm wae eects n empment are sti insinifcant,whie in the secnd case, the minimm wae eects n empment and ther actrs becmeer imprtant. This is becase the impementatin and increase in minimm waes abe the

wrkers marina prdctiit wi ike create aderse respnses rm frms in the rm redcedempment and ther epenses b the frms r wrkers.

section iV

liteRatuReReVieW



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A reprt rm SMERu (2001) prides a d eampe b shwin the minimm wae impactn wae distribtin in Indnesia drin 19882000. In 1988, the minimm wae had er itteeect n wae distribtin, bt rm the beinnin 1992, the minimm wae eects n waedistribtin became mre apparent s that b 2000 mst waes were aread cstered arnd the

minimm wae. This shws that minimm wae cmpiance has steadi increased er time andhas becme bindin r mst wrkers in the rban rma sectr. Rama (2001) as shwed thatabt 15% manactrin wrkers in Indnesia are paid ess than the minimm wae, and that

this prprtin rises t 26.9% r wmen and 20.6% r wrkers nder 25 ears ae. The bindinminimm wae reatins are as eident rm the sre rests in this std, which wi bediscssed rther in the net sectin.

v. MoDEllINg DEvEloPMENt AND DAtA usED

A. Deepin he Mde

T estimate the eects the minimm wae n empment ee, it is necessar t deepa mde that inks the empment ee n the et hand side and the minimm wae n the riht

hand side the eqatin, tether with ther reeant epanatr ariabes. The win mdeis sed t estimate the eects minimm waes n empment:

Nij= i+ iWij+ i Iij+ iSij+ i Dij+ ij ( 1 )

where Nis the arithm empment rwth and Wis the arithm ae aerae wae trepresent the ctatins in the minimm wae. The ariabesIand Sare cntrin ariabes r

indstr tpe r bsiness sectr, and frm size, respectie. The ariabe D is a dmm ariaber tpe frms, e.., whether eprtin r nneprtin, rein r dmestic, and sma r arefrms.

The mde deeped in this std is made pssibe b the niqe data aaiabe rm theinestment cimate sre cndcted in Indnesia in 2003/2004 (ADB 2005). The mdein apprachadpted in this paper has neer been appied bere since preis stdies n the minimm wae

isse hae sed dierent mdein appraches and data srces.

The tw main ariabes sed in eqatin (1) are, therere, the arithm aes empmentrwth and aerae wae t represent minimm wae ctatins. Empment rwth between

2001 and 2002 is sed as the dependent ariabe, whie aerae waes are cmpted b diidintta wae cst with tta empment in 2002. Empment rwth and aerae wae are cmptedr each tpe wrker, i.e., nskied wrkers and skied wrkers. The skied wrkers are rthercassifed int skied prdctin wrkers, pressinas, and manaement. Reressin anases

are then perrmed r nskied prdctin wrkers and skied wrkers dierent tpes: skied

prdctin wrkers, pressinas, manaement, and the sm r a skied wrkers.

The mdein eqatin r estimatin the minimm wae eects n trainin can be presented

as:

Tij= i+ iWij+ i Iij+ iSij+ iDij+ ij (2)

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section V

MoDelling DeVelopMentanD Data useD

where T is the the nmber persn-weeks trainin in 2002 r each frm, and W, S,and D are defned as in eqatin (1) abe. Ater aris trias, the ariabe Iwas sbseqentremed in the trainin reressins de t insfcient nmber bseratins and t btain mrerbst rests.

b. Minimm Wae variae ued in he Mde

In eqatins (1) and (2), ctatins in the aerae wae are sed as a pr r ctatinsin the minimm wae. This impicit assmes that the minimm wae reatins are bindin andthat the ctatins in the aerae wae are drien mst b the ctatins in the minimm

wae. This is a strn assmptin that mst be fed i the mdein rests in this paper aret be aid. rtnate, the best inrmatin aaiabe s ar indicates that this is the case rIndnesia, especia in the manactrin sectr where this std cncentrates. As discssedbere, Rama (2001) shwed that n abt 15% manactrin wrkers in Indnesia are paid

ess than the minimm wae, and SMERu (2001) as nted that the minimm wae in enerahas been mre bindin. The hiher minimm wae rate rther cnfrms the bindin aspect as the

aes minimm waes hae becme cser t the aerae waes.

The sre rests sed in this std, which is cncentrated n the manactrin sectrn, rther cnfrm the bindin aspect the minimm wae. As can be seen in ires 2 and3, the minimm wae cmpiance reaches 91.9% r a frms. The cmpiance rates in the paperand transprt indstries are een amst 100%. lkin at the dierent tpes frms, abt

97% eprters and 86% nneprters cmp with the minimm wae reatins. r reinand dmestic frms, cmpiance rates are een hiher at 99% and 91%, respectie. B frm size,cmpiance with minimm wae reatins is mst eident amn are frms (98.3%), wed

b medim frms (85.4%), then sma frms (80%). Therere, there is a d reasn r stdinthe impact minimm waes sin the data set, and it is jstifabe t se the ctatins inthe aerae wae as a pr r the ctatins in the minimm wae.

The pressre increasin the aerae wae cmin rm risin minimm waes can asbe traced rm the wa the minimm wae is impemented in Indnesia. The minimm wae ratewas based n the amnt waes reqired t meet the phsica minimm need (Kebutuhan Fisik

Minimum r KM) a particar wrker, i.e., sine, married, and married with ne chid. The amnt

is cacated based n the prices a bnde cmmdities incded in the KM. The prpsedrate based n the bnde cst is then netiated in the three-part netiatin meetin in thewae cnci the abr nins, empee assciatins, and ernment representaties. In this

cntet, an increase in the enera price wi be mre ike reected in the increase demandedminimm wae, bt nt ice ersa.6 Accrdin, the minimm wae rate is set independent,disreardin the frms prdctin cst and wrker prdctiit.7

6 This can be seen rm the man cases emper assciatins wakin t wae netiatins de t nreaisticdemands r hih increases in the minimm wae.

7 r sme eperts n the minimm wae in Indnesia, the se aerae wae t represent the ctatin in the

minimm wae can arab nderestimate the minimm wae ariabe. This is becase the trend and ctatins inthe minimm waes are reatie hiher than thse the aerae wae.



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FIGURE 2MINIMUM WAGE COMPLIANCE RATE ACROSS DIFFERENTTYPES OF INDUSTRIES (PERCENT)

80 85 90 95 100

Paper

TransportLeather and Footwear

Electronics

Chemicals

Tobacco

Wood

Garments

Textiles

Food and Beverage

Total

Source: Productivity and Investment Climate Survey in Indonesia 2003/2004 (ADB 2005)

FIGURE 3MINIMUM WAGE COMPLIANCE RATE ACROSS DIFFERENTTYPES OF FIRMS (PERCENT)

Non-exporter

Exporter Domestic Large MediumForeign Small Total

100

80

60

40

20

0

Source: Productivity and Investment Climate Survey in Indonesia 2003/2004 (ADB 2005).

C. tein he vaidi f he Minimm Wae variae

T rther ensre that the aerae wae can be sed as a pr ariabe r ctatinsin the minimm wae, a test is carried t b cndctin a reressin the aerae wae

nskied wrkers n the district dmm ariabes:

AVWi= + DSTi+ i (3)

whereAVWis the aerae wae nskied wrkers acrss districts and DSTis the district dmmariabe. Bth ariabes are cnstrcted rm the sre data.

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The prpse this test is t pre that the aerae waes nskied wrkers acrssdistricts are statistica dierent, win the distribtin the acta minimm waes acrssdistricts that is ikewise dierent. Since the acta minimm wae is set at a district ee, thereressin the acta minimm wae n the district dmm mst shw a sinifcant rest.

Accrdin, i aerae wae is a d pr r the ctatins in the acta minimm wae,repacin the acta minimm wae with the aerae wae shd prdce simiar rests. Thererethe estimatin in eqatin (3) abe shd prdce rbst rests. Tabe 1 smmarizes the reressin

rests, which shw that this is the case. This can be seen rm the hih ae statistics, wprbabiit ae (p-ae) , and p-aes district dmm ariabes.

table 1testingthe ValiDityof using log aVeRage Wageasa pRoxy VaRiablefoR fluctuations

inthe actual MiniMuM Wage

log_AvW CoEFFICIENts sE t-vAluEs P>|t| % CI EstIMAtEs

DST1 15.47 0.552 28.02 0.000 14.39 16.56

DST2 15.54 0.664 23.41 0.000 14.23 16.84DST3 16.21 0.664 24.43 0.000 14.91 17.52DST4 15.09 0.813 18.56 0.000 13.49 16.69DST5 15.67 0.469 33.4 0.000 14.75 16.60DST6 16.74 1.408 11.89 0.000 13.97 19.51DST7 15.21 0.469 32.41 0.000 14.29 16.13DST8 15.46 0.290 53.24 0.000 14.89 16.03DST9 16.69 0.890 18.74 0.000 14.94 18.44DST10 15.25 0.235 64.98 0.000 14.79 15.71DST11 15.87 1.991 7.97 0.000 11.96 19.78DST12 14.70 0.498 29.52 0.000 13.72 15.67DST13 15.48 0.996 15.55 0.000 13.53 17.44DST14 15.38 0.297 51.8 0.000 14.79 15.96

DST15 15.28 0.890 17.16 0.000 13.53 17.03DST16 15.29 0.813 18.8 0.000 13.69 16.88DST17 14.17 0.457 31.02 0.000 13.27 15.07DST18 15.40 0.996 15.47 0.000 13.45 17.36DST19 15.07 0.383 39.32 0.000 14.31 15.82DST20 14.50 0.415 34.91 0.000 13.68 15.31DST21 15.17 0.358 42.41 0.000 14.46 15.87DST22 15.60 0.364 42.92 0.000 14.89 16.32DST23 15.95 0.358 44.6 0.000 15.25 16.65DST24 14.05 0.890 15.78 0.000 12.30 15.80DST25 14.84 0.630 23.57 0.000 13.60 16.08DST26 15.02 0.575 26.14 0.000 13.89 16.15DST27 14.30 0.600 23.83 0.000 13.12 15.48Srce SS d MS N. bseratins 481

( 27, 454) 1042.63Mde 111603.4 27 4133.5 Prb > 0Resida 1799.9 454 4.0 R-sqared 0.9841

Adj. R-sqared 0.9832Tta 113403.3 481 235.76 Rt MSE 1.9911

section V

MoDellingDeVelopMentanD DatauseD



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D. Daa srce

The std ses data rm the Prdctiit and Inestment Cimate Sre Indnesianmanactrin frms (ADB 2005). This sre was cmpeted in 2003/2004, cerin 713 frms rm

10 manactrin indstries in dierent parts the cntr. The sre was carried t as part the inestment cimate std cndcted jint b ADB, the Wrd Bank, Badan Psat Statistik(BPS), and the Indnesian Crdinatin Ministr r Ecnmic Aairs.8 This is a niqe sre atthe frm ee that has reatie cmpete inrmatin abt the frm, incdin frm characteristics,

nmber wrkers r dierent skis and their wae paments, and trainin r wrkers. The sreas cected inrmatin n frms sch as cnstraints drin estabishment; inrastrctre andther serices; cnict restin and ea enirnment; capacit and innatin; abr reatins;fnance, saes, and prdctiit; empment dnamics; and hman capita stck and acqisitin.

The sre can be seen as an etensin the standard inestment cimate assessment cndctedwrdwide b the Wrd Bank. The ariabes incded in the sre are as mch mre cmpetethan the rear manactrin sres cndcted b BPS as part its statistica sstem.9

The win manactrin sbsectrs were incded in the Prdctiit and Inestment Cimate

Sre: d and beeraes, tbacc, teties, arments, eather and twear, wd, paper, chemicasand chemica prdcts, eectrica appiances, and transprt eqipment. The sbsectrs were seected

becase the are the main driers manactrin tpt as reected in their cntribtin tae-added enerated drin 19962000. The sre cered frms in the win 11 princes,which were as seected based n their imprtance in the eneratin natina ae-added:Jakarta, Banten, West Jaa, Centra Jaa, yakarta, East Jaa, Nrth Smatera, Sth Sawesi,

East Kaimantan, Ria, and Bai.

Mst stdies n the eects minimm waes are based n macrecnmic data r empmentsres carried t at the hsehd r indiida ee. Sch stdies ths make se macr

empment data inked t eraphica ariabes r hsehd/ami member characteristics.Preis stdies n Indnesia discssed in the iteratre reiew are as mst based n hsehd

and abr rce sres. Stdies based n frm data are er ew, incdin thse b Katz and Kreer(1992) and Card and Kreer (1993).

E. Daa n Empmen and trainin

1. Empmen grwhEmpment rwth rm 2001 t 2002 was abt 47.2% r nskied prdctin wrkers

and 90.4% r skied prdctin wrkers. The hihest empment rwth was bsered in thetetie indstr, which rew b 169.7% and 206.8% r nskied and skied prdctin wrkers,respectie. These rwth estimates cacated rm the sre rests are bis dierent rm

the fcia nmbers, which mst be cacated rm the mre cmpete sampes representatie atthe natina ee.10

8 This is part ADBs Technica Assistance n Imprin the Cimate r Inestment and Prdctiit in Indnesia (Sma

Scae TA 3999); see ADB (2005).9 Detaied inrmatin abt the sre, incdin the qestinnaire sed, is aaiabe rm the athrs.10 Detaied inrmatin abt the empment rwth r dierent tpes wrkers in 19902003 can be btained in

Siart et a. (2006), whie data r ther perids and ther reated inrmatin are aaiabe rm the BPS websiteat http://www.bps..id.

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Psitie empment rwth was recrded in the win sectrs: tbacc (51%), teties(170%), wd (31%), arments (19%), d and beeraes (7%), and paper (2%). Redctins inempment were nted in transprt eqipment (11%), eectrica appiances (10%), eather andtwear (6%), and chemicas and chemica prdcts (2%).

table 2 [unciteD!!!!!!!]eMployMentgRoWthof pRoDuction WoRkeRsacRoss DiffeRent inDustRies (peRcent)

INDustRy uNskIllED skIllED

Chemicas 1.9 22.8

Eectrnics 9.6 25

d and beerae 7.2 160.7

garments 19.3 86.9

leather and twear 6.3 10.2

Paper 1.8 7.6

Teties 169.7 206.8

Tbacc 50.6 7.9Transprt 11.4 11.1

Wd 31 6.1

Tta 47.2 90.4

Srce: Prdctiit and Inestment Cimate Sre in Indnesia 2003/2004 (ADB 2005).

B frm tpe, empment rwth was bsered r eprters (18.7%) and nneprters (75.1%).The nmber wrkers rew b 55.1% in dmestic frms bt decined b 5.6% in rein frms.

Based n frm size, empment rew b 91.2% r are frms; remained stanant r medim-sizefrms; and decined b 18.7% r sma frms.

. trainin Priinires 4 and 5 shw that abt a qarter the frms sreed in this std prided in-hse

trainin r their wrkers. The hihest share in-hse trainin is prided b frms in eectrnics

(57.6%), transprt (44.1%), and eather and twear (29.3%). lkin at the tpes frms,eprters prided prprtinate mre in-hse trainin than nneprters, i.e., 34.3% cmparedwith 14.1%. This is as tre r rein frms (43%) as cmpared t dmestic frms (21%). lare

frms as tend t pride mre trainin than medim r sma frms.

r tside trainin, the patterns are simiar. Abt 23.8% frms prided tside trainint their wrkers. Arnd 32.9% and 14.6%, respectie, eprters and nneprters prided

trainin. Meanwhie, 35.6% rein frms, and 21.7% dmestic frms, prided trainin. lare

frms as prided reatie mre tside trainin than medim and sma frms.

A cse eaminatin the wa the qestin was asked in the sre reeas that part

the eterna trainin miht be ntar in natre and nt necessari be prided b r be theappicatin frm pic. Therere, the ariabe participatin in tside trainins is ecdedin the mdein estimatin, cncentratin instead n in-hse trainin t aid an measrementerrrs.

section V

MoDellingDeVelopMentanD DatauseD



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FIGURE 4PERCENTAGE OF FIRMS CONDUCTING TRAINING FOR THEIR WORKERS

(BY TYPE OF INDUSTRY)

Electronics

TransportLeather and Footwear

Food and Beverage

Chemicals

Wood

Textiles

Garments

Tobacco

Paper

Total

0 10 20 30 40 50 60

In-house Outside


FIGURE 5PERCENTAGE OF FIRMS CONDUCTING TRAINING FOR THEIR WORKERS

(BY TYPE OF FIRM)

Non-exporter

In-house

Exporter Domestic Large MediumForeign Small Total

50

40

30

20

10

0


Outside

3. trainin Percepin

In additin t cectin inrmatin n the nmber wrkers participatin in in-hse andtside trainin and n tta trainin csts, the sre as asked qestins abt the frms perceptinn the imprtance trainin r their wrkers. The frms were asked t rank each imprtant actr

reated t trainin n a scae 0 (nt imprtant) t 4 (er imprtant). The eiht crcia actrsr trainin are: (i) aaiabiit frm resrces; (ii) abr trner; (iii) knwede abt trainintechniqes and manaement trainin prrams; (i) aaiabiit matre techn t stimateearnin b din r the new wrkers; () aaiabiit skied wrkers that can be readi hired

rm ther frms; (i) ee skied attained at edcatin is nt enh; (ii) aaiabiit in-hse trainin; and (iii) skepticism abt benefts trainin.

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Tabe 3 smmarizes the aerae scre frms perceptin with reard t trainin r theirwrkers. Tw main cncsins can be deried rm the smmar rests as ws:

(i) Firms seem ully aware o the importance o providing training or their workers and thatthe workers skill levels gained rom schooling are not adequate or their jobs. Therere,

frms wi be mre ike t inest in trainin prided there are resrces aaiabe.

(ii) Labor turnover and availability o trained workers rom other rms are not importantdetermining actors or rms to invest in training. This shws that the frms cnfdentinest in trainin and that there is n eident cncern trained wrkers min tdierent frms.

rthermre, cmparin frms perceptins n trainin acrss dierent sectrs and their actaprisin trainin hihihts the psitie assciatin between trainin perceptin and traininprisin. irms in the eectrnic sectr, r instance, seem t be mre aware the imprtance

trainin, and the as cndct reatie mre trainins than frms in ther sectrs.

table 3

peRceptionof fiRMson tRaining

FACtoRs CoNsIDERED AvERAgE sCoRE*

Aaiabiit resrces 2.09

labr trner 1.14

Aaiabiit matre techn t stimate earnin- b-din r new wrkers 1.96

Knwede trainin techniqes and manaement trainin prrams 1.76

Aaiabiit skied wrkers that can be readi hired rm ther frms 0.94

Skis that wrkers earn in sch are nt adeqate 1.45

Aaiabiit in-hse trainin 1.64

Skepticism abt benefts trainin 1.14

*The scre ae ranes rm 0 r nt imprtant t 4 r er imprtant.

Srce: Prdctiit and Inestment Cimate Sre in Indnesia 2003/2004 (ADB 2005).

vI. EstIMAtIoN REsults

A. Minimm Wae and Empmen

1. unied WrerTabe 4 smmarizes the rests empment reressins r nskied prdctin wrkers. As

mentined in the methd sectin, the empment ariabe sed in the mdein estimatinis the rwth nskied wrkers in arithmic rm, whie the minimm wae ariabe is the aerae wae. De t sme missin bseratins, the nmber sampes sed in the reressinis redced t 453 frms.

section Vi

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28/43

table 4RegRessionsonthe iMpactof MiniMuM Wagesonthe eMployMentof unskilleD WoRkeRs

vARIAblEs MoDEl 1 MoDEl MoDEl 3 MoDEl

MINWAgE -0.022(-1.74)*

-0.023(-1.80)*

-0.021(-1.65)*

-0.022(-1.72)*

IND1 -0.328(-2.13)**

-0.303(-1.97)**

-0.306(-1.98)**

-0.318(-2.06)**

IND2 -0.304

(-1.6)

-0.316

(-1.68)*

-0.259

(-1.35)

-0.263

(-1.36)

IND3 -0.224

(-1.50)

-0.19

(-1.27)

-0.216

(-1.44)

-0.219

(-1.46)

IND4 -0.254

(-1.73)*

-0.238

(-1.62)

-0.227

(-1.53)

-0.244

(-1.65)*

IND5 -0.404

(-2.46)**

-0.392

(-2.40)**

-0.379

(-2.30)**

-0.388

(-2.35)**

IND6 -0.237(-1.35)

-0.199(-1.14)

-0.239(-1.36)

-0.237(-1.35)

IND7 -0.193(-1.31)

-0.168(-1.15)

-0.17(-1.15)

-0.186(-1.26)

IND8

IND9 -0.431

(-2.31)**

-0.399

(-2.15)**

-0.41

(-2.20)**

-0.412

(-2.20)**

IND10 -0.299

(-1.88)*

-0.274

(-1.72)*

-0.269

(-1.68)*

-0.295

(-1.85)*

SME-0.106

(-2.41)**

ExPoRTINg -0.067

(-1.47)

oREIgN -0.066

(-0.98)

Cnstant 0.605(2.48)**

0.643(2.65)**

0.599(2.46)**

0.600(2.46)**

N. bseratins 453 453 453 453

-statistic 1.58 1.98* 1.64 1.52

Adjsted R2 0.013 0.023 0.015 0.013

Nte: ires in parenthesis are t-ratis, where *** means sinifcant at 1%; ** at 5%; and * at 10% sinifcance ee.Srce: Cacated rm the Inestment Cimate Sre 2003/2004 (ADB 2005).

The reressin rests shw a neatie reatinship between empment and minimm waesand the rests are aid een ater cntrin r indstr tpes and frm characteristics sch assize, eprtin actiit, and rein wnership. The basic reressin rests Mde 1 shw thatempment ee nskied wrkers drps b 2% when the minimm wae is dbed. The same

neatie empment easticities are as nd in the ther three mdes, i.e., when cntrinr sma frms as in Mde 2, r eprtin frms in Mde 3, and r rein frms as in Mde 4.

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A disempment eects minimm waes are statistica sinifcant at the 10% sinifcanceee and are qite stabe r dierent tpes mdein specifcatins. The disempment eectsare eident in biariate reressins between empment and waes n, as we as ater theintrdctin dmm ariabes r indstr tpes and frm characteristics.

Mreer, cmparin rests acrss the r dierent mdes shws that the disempmenteect in Mde 2 is mre seere than in ther mdes. This indicates the imprtant re frm characteristics in determinin the manitde disempment eects. In particar, the

disempment eects minimm waes are mre seere r sma frms, and there is n eidencethat the aderse eects n eprtin and rein frms are wrse than in nneprtin and dmesticfrms. The seere disempment eects minimm waes in sma frms are cnsistent with the

earier fndin b Rama (2001).

In additin, there are as sinifcant sectra eects bsered in the rests. The neatieeects are reatie aried acrss sectrs in terms sinifcance ee bt nt n the sin

cefcient dmmies, which shw a cnsistent pattern acrss sectrs and mdes. gien thatminimm wae cmpiance rates acrss sectrs is aread er hih (ranin rm 88% t 100%),

the sinifcant aderse eects minimm waes acrss sectrs indicate that there seems t be apsitie reatinship between cmpiance and manitde the aderse eect. Ths, becase frms

are cmpin with the minimm wae reatins, the react mre neatie t an increase inthe minimm wae, e.., b hirin ewer nskied wrkers and recritin mre skied nes.

. sied Wrer

Reressins n the three dierent tpes skied wrkers, name skied prdctin wrkers,

pressinas, manaement, and the sm a three cateries skied wrkers, are as carriedt in this std. r each tpe skied wrker, empment eects minimm waes n dierenttpes sectrs and frms are estimated. Tabe 5 smmarizes the main rests, cncentratin nn the minimm wae ariabe, whie the detaied rests r each reressin are presented in

Appendi 1.

The reressin rests r skied prdctin and manaement wrkers shw the neatieeects minimm waes n empment ee bt the eects are are insinifcant. The eects

n pressina wrkers, hweer, are psitie athh the cefcient is as insinifcant. Theera rests are qite stabe r dierent mdein specifcatins and ater the intrdctin cntrin ariabes.

Cmparin the rests acrss r mdein specifcatins, there are sme simiarities bseredin the rests each tpe skied wrker in Mde 1, and ater cntrin r sma frms in Mde2, r eprters in Mde 3, and r rein frms in Mde 4. In ther wrds, the cnsistent restpatterns are bsered r dierent tpes skied wrkers: skied prdctin, manaement, and

tta skied wrkers. The cse simiarit the reressin rests n skied wrkers dierenttpes and acrss dierent mdes shws that the insinifcant impacts minimm waes n skiedwrkers are cmmn r a skied wrkers in a tpes frms.11 This is in cntrast t the reressin

rests r nskied wrkers. This fndin rther emphasizes the crcia re minimm waesr nskied wrkers bt nt r skied nes. This fndin is irnic ien that the minimm wae

11 The dmm cefcients in each mde and tpe skied wrkers are, hweer, dierent shwin arin eects minimm wae n sma, eprtin, and rein frms. See smmar tabes in Appendi 1 r detais.

section Vi

estiMationResults



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was intrdced in the frst pace t prtect the nskied wrkers, wh presmab receie waesarnd the minimm wae ee.

table 5RegRessionsonthe iMpactof MiniMuM Wagesonthe eMployMentof skilleD WoRkeRs

skIllED WoRkERs MoDEl 1 MoDEl MoDEl 3 MoDEl

sied Prdcin WrerMin. Wae -0.025

(-0.93)

-0.026

(-0.95)

-0.022

(-0.81)

-0.021

(-0.78)Adjsted R2 0.0013 0.0006 0.0037 0.0169N. obs. 596 596 596 596

PrfeinaMin. Wae 0.004

(0.39)0.002(0.18)

0.002(0.21)

0.004(0.36)

Adjsted R2 0.0112 0.0011 0.0069 0.0126N. obs. 393 393 393 393

ManaemenMin. Wae -0.009

(-0.85)-0.011(-1.06)

-0.011(-1.06)

-0.009(-0.84)

Adjsted R2 0.0036 0.0066 0.007 0.002N. obs. 606 606 606 606

ta siedMin. Wae -0.019

(-0.62)

-0.019

(-0.63)

-0.012

(-0.4)

-0.013

(-0.42)Adjsted R2 0.01 0.009 0.02 0.027

N. obs. 676 676 676 676Nte: ires in parenthesis are t-ratis, where *** means sinifcant at 1%; ** at 5%; and * at 10% sinifcance ee.

Srce: Cacated rm the Inestment Cimate Sre 2003/2004 (ADB 2005).

b. Minimm Wae and trainin

1. unied Wrer

Net, reressin anasis is appied n minimm wae impementatin and trainin prisin

r bth nskied and skied wrkers dierent cateries. The trainin ariabe sed in themdein estimatin is the nmber persn-weeks trainin r nskied wrkers. Tabe 6

smmarizes the reressin rests r the nskied wrkers, whie Tabe 7 is r skied wrkers dierent tpes. The smmar rests are presented here, whie the detaied reressin rests n

trainin are in Appendi 2. T be cnsistent with the wae ariabe and t measre the easticitae, the trainin ariabes are as transrmed int arithmic rm.

The smmar rests in Tabe 6 cear shw that dierent tpes frms erwhemin

redce in-hse trainin r nskied prdctin wrkers as the minimm wae increases. This isshwn b the rests in the base reressin (Mde 1), which has a cefcient 0.39, meanin

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that dbin the minimm wae wi wer the in-hse trainin prided b abt 39%. Simiarrests and manitdes are bsered in Mde 2 with easticit 34% ater cntrin r smafrms; Mde 3 with easticit 36% ater cnsiderin r eprters; and Mde 4 with easticit 35% when cntrin r rein frms. A the neatie eects the minimm wae n pridin

trainin r nskied wrkers are statistica sinifcant een at the 1% cnfdence ee, eceptin Mde (2) where the sinifcant ee is at 5%. The rests shw that the neatie impacts minimm waes n trainin prisin are bsered acrss dierent tpes frms.

table 6RegRessionsonthe iMpactof MiniMuM Wageson in-house tRaining

foR unskilleD pRoDuction WoRkeRs

vARIAblE MoDEl (1) MoDEl () MoDEl (3) MoDEl ()

MINWAgE -0.392(-3.11)***

-0.344(-2.89)**

-0.364(-3.11)***

-0.352(-2.79)**

SME -1.457

(-2.65)**ExPoRTINg 1.418(2.79)**

oREIgN 1.288

(1.59)Cnstant 9.16

(3.71)***

1.457

(2.65)**

8.757

(3.83)***

8.59

(3.51)***N. bseratins 49 49 49 49-statistic 2.55** 3.39*** 3.52*** 2.64**Adjsted R2 0.2056 0.3095 0.3211 0.2351

Nte: ires in parenthesis are t-ratis, where *** means sinifcant at 1%; ** at 5%; and * at 10% sinifcance ee.


Mreer, the aderse eects minimm waes n trainin prisin prided b sma frmsare mre seere than in are frms. The same appies r the nneprtin and dmestic frms,

meanin that the aderse eects n nneprtin and dmestic frms are wrse than n eprtinand rein frms, respectie. This fndin hihihts the strner need r trainin nskiedwrkers in the are, eprtin, and rein frms een as the minimm wae increases. r sma

frms, minimm wae hikes increase disempment eects; and the eects n sma frms seemt be the wrst aected.

. sied Wrer

Reressins n trainin prisin r skied wrkers dierent cateries were cndcted r

each tpe skied wrker, name, skied prdctin wrkers, pressinas, manaement, and ttaskied wrkers. Tabe 7 smmarizes the reressin rests, cncentratin n n the minimm waeariabe, whie the detaied rests r each reressin skied wrkers are presented in Appendi2. As in the case nskied wrkers, the trainin ariabe sed in the eqatins is the nmber persn-weeks trainin. T be cnsistent with the wae ariabe and t measre easticit, the

trainin ariabe is transrmed int a arithmic rm.

section Vi

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32/43

Tabe 7 shws the neatie eects in-hse trainin prisin amn dierent tpes skied wrkers. The strnest neatie eects are r manaement (statistica sinifcant at 1%),wed b pressinas (statistica sinifcant at 5%), and skied prdctin wrkers (statisticasinifcant at 10%). r these three cateries skied wrkers, the rests shw that dbin

the minimm wae wi redce persn-weeks trainin manaement b 28%, pressinas b 23%,and skied prdctin wrkers b 22%. These rests are cnsistent acrss dierent mdes.

lkin at the dmm ariabes eects (Appendi 2), the neatie eects minimm waes

n trainin prisin r skied wrkers are cnsistent mre seere r sma frms than r arefrms. The dmm rests r eprtin r rein frms are are insinifcant. This aain hihihtsthe aderse eects minimm waes n sma frms.

table 7RegRessionsonthe iMpactof MiniMuM Wageson in-house tRaining

foR skilleD WoRkeRs

skIllED WoRkERs MoDEl (1) MoDEl () MoDEl (3) MoDEl ()

sied Prdcin WrerMin. Wae -0.23

(-1.69)*-0.213(-1.62)

-0.226(-1.66)*

-0.227(-1.65)*

Adjsted R2 0.0372 0.0266 0.0405 0.0539N. obs. 71 71 71 71

PrfeinaMin. Wae -0.234

(-2.00)**-0.237

(-2.04)**-0.232

(-1.95)**-0.234

(-1.97)**

Adjsted R2 0.0125 0.028 0.0148 0.0156N. obs. 46 46 46 46

ManaemenMin. Wae -0.274

(-3.55)***-0.276

(-3.55)***-0.279

(-3.63)***-0.275

(-3.52)***

Adjsted R2 0.2418 0.2269 0.2502 0.2219N. obs. 46 46 46 46

ta siedMin. Wae -0.151

(-1.29)

-0.151

(-1.36)

-0.147

(-1.27)

-0.148

(-1.25)

Adjsted R2 -0.053 0.065 -0.028 -0.063N. obs. 81 81 81 81



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vII. CoNClusIoNs AND PolICy IMPlICAtIoNs

This std cnfrms the neatie eects minimm waes n the empment r hirin nskied wrkers. The rest is aid een ater sbjected t appicatins aris mdein

specifcatins. In enera, the std nd that dbin the minimm wae wi redce hirin nskied wrkers b 2%. This is irnic ien that the minimm wae was intrdced in the frstpace t main prtect nskied wrkers, wh are sppsed receiin waes arnd the minimmwae ee.

The std as fnds that the disempment eects minimm waes n nskied wrkersare mch mre seere amn sma frms, whie the rests r eprtin and rein frms are ndierent rm nneprtin and dmestic frms respectie. This fndin hihihts the imprtant

re frm size in determinin the aderse eects minimm waes n nskied wrkers.

With the eceptin pressina wrkers where psitie impacts are seen, skied wrkersas ehibit disempment eects rm minimm waes. The neatie impacts are, hweer, are

insinifcant, reectin the strn demand r skied wrkers despite increases in the minimm

wae.The rest r trainin prisin nskied and skied wrkers as pints t the minimm

waes aderse eects. unskied wrkers ser a cnsistent redctin in the prisin in-hsetrainin r them win a minimm wae increase, and the neatie eects are statisticaer sinifcant. In enera, dbin the minimm wae wi redce in-hse trainin prisin

r nskied wrkers b abt 3439%. The neatie eect is mch strner in sma frms andess seere in eprtin and rein frms. This ma reect the strner need r trainin een rnskied wrkers in the eprtin and rein frms. Reca that eprtin and rein frms cndctreatie mre trainin than nneprtin and dmestic frms, respectie.

Cmparin the manitdes the minimm waes disempment and detrainin eects nnskied wrkers, the rests shw that the redctin in trainin prisin is mch strner than

the redctin in hirin. In additin, there seems t be a strn crreatin between disempmentand detrainin eects as can be seen rm their reatie strner aderse impacts in sma frmscmpared t that in eprtin and rein frms. This aain hihihts the imprtant re frmsize in determinin the aderse eects minimm waes n nskied wrkers.

r skied wrkers, the strnest neatie eects n trainin prisin are bsered rmanaement wrkers, wed b pressina and skied prdctin wrkers. r skied wrkers,dbin the minimm wae wi decrease persn-weeks trainin b 2327%. The neatie eects

n trainin prisin r skied wrkers in sma frms remain hiher than in are frms. This rtherampifes the minimm waes disempment eects in sma frms, indicatin that sma frms arethe mst seere aected b minimm wae increases. Cmparin the minimm wae eects nempment and trainin shws that in additin t the frms size, the need r trainin seems t

be inenced b jb stats r jb sphisticatin.

The era rests sest that hain been rced t pa hiher waes de t the bindinand increasin minimm wae, frms chse t redce hirin nskied wrkers and cncentrate

instead n recritin the aread skied nes. In additin, frms as redce trainin prisinespecia r nskied wrkers, eain them nemped and ntrained. This respnse cd raisea seris cncern as the frms seem t adpt a shrt-term pic at the cst mre n-term

section Vii

conclusionsanD policy iMplications



34/43

repercssins, especia r the nskied wrkers. At the macrecnmic ee, this shrt-sihtedrespnse can rther eacerbate the nempment prbem and therere n pert. unrtnate,this tendenc seems t be the case as nempment wrsens and the pert cnditin ais timpre (see Siart et a. 2006).

Mreer, the crcia re irms characteristics in determinin the minimm waesdisempment and detrainin eects raises sme reseratins abt the rests preis stdiessin hsehd r abr rce sres, since b the sres desins, it is er difct t take

disempment and detrainin eects int accnt.

This std as nd a strn disempment eect r nskied wrkers een it ses a crss-indstr data set at the frm ee. This is in cntrast t Kreers (1994) fndin that the aderse

empment eects are sa weak in crss-indstr anases bt strn in time series stdies.

The strn disempment eects in this std ma part be de t the wa the minimmwae has been set p in Indnesia, which is characterized b strn barainin pwer rm abr

nins and b disreardin wrker prdctiit and enera price chanes. other cntribtin actrsincde the aderse eects ther ernment picies that create riidities in the abr marketsch as the seerance pa sstem, which is bend the scpe this research.

The ke pic impicatins this std ca r imprin the abr market cnditin inIndnesia, incdin hw the minimm wae is set. Creatin a eibe abr market t ensre thatthe minimm wae determinatin wrks prper is a necessar cnditin that mst be wed

p b imprements in the detaied mechanism n hw the minimm wae shd be set. The ratema nt necessari be a sine ee r a tpes wrkers, bt it cd cnsider dierent tpes wrkers in dierent reins, sectrs, ae rps, and s n. The rates shd as be pdatedrear win chanes in the reeant prices, as we as b takin ther waes and era wae

distribtin int accnt. Benchmarkin with the median wae and ther acceptabe wa waeindeatin, r instance, can be sed as a startin pint. The Ilo Minimm Wae iin CnentinN. 131/1970 identifed r criteria, name, the needs wrkers and their amiies, the capacit

frms t pa, the ee incmes and ther waes in the ecnm, and the reqirement the ecnmic deepment the cntr (Saet 2006), which shd be pt in baance withtnecessari sacrifcin the interest prft-maimizin capitaists. Therere, strikin the rihtbaance is rea the ke. In the end, the minimm wae shd reect mre a air and cmpetitie

wae rather than a fed and distrted wae. The rate mst arantee a decent standard iinsince the wrkers shd be happ with their wrk and nt be cnrnted with a chice betweenthe hmiiatin pert pa and the indinit nempment.

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APPENDIx 1EMPloyMENt REgREssIoNs

appenDix table 1.1

RegRessionsonthe iMpactof MiniMuM Wageonthe eMployMentof skilleD pRoDuction WoRkeRs

vARIAblEs MoDEl (1) MoDEl () MoDEl (3) MoDEl ()

MINWAgE -0.025(-0.93)

-0.026(-0.95)

-0.022(-0.81)

-0.021(-0.78)

IND1 -0.234(-0.85)

-0.202(-0.73)

-0.173(-0.62)

-0.156(-0.57)

IND2 -0.425

(-1.42)

-0.433

(-1.45)

-0.305

(-1.00)

-0.163

(-0.53)IND3 0.007

(0.03)

0.048

(0.18)

0.021

(0.08)

0.029

(0.11)

IND4 -0.283(-1.07)

-0.261(-0.99)

-0.219(-0.83)

-0.226(-0.87)

IND5 -0.243(-0.83)

-0.236(-0.80)

-0.177(-0.60)

-0.101(-0.34)

IND6 -0.176(-0.56)

-0.129(-0.41)

-0.165(-0.53)

-0.163(-0.52)

IND7 -0.208(-0.79)

-0.198(-0.75)

-0.137(-0.52)

-0.165(-0.63)

IND8IND9 -0.167

(-0.56)-0.143(-0.48)

-0.098(-0.33)

-0.044(-0.15)

IND10 -0.115

(-0.40)

-0.100

(-0.34)

-0.033

(-0.11)

-0.094

(-0.33)

SME -0.127(-1.56)

ExPoRTINg -0.167

(-1.99)**oREIgN -0.402

(-3.44)***Cnstant 0.440

(0.88)0.481(0.96)

0.419(0.84)

0.373(0.75)

N. bseratins 596 596 596 596-statistic 0.92 1.06 1.2 1.93**Adjsted R2 0.0013 0.001 0.0037 0.0169


appenDix



36/43

appenDix table 1.2RegRessionsonthe iMpactof MiniMuM Wageonthe eMployMentof pRofessional WoRkeRs


MINWAgE 0.004(0.39)

0.002(0.18)

0.002(0.21)

0.004(0.36)

IND1 0.105

(0.63)

0.134

(0.8)

0.081

(0.48)

0.098

(0.58)IND2 -0.024

(-0.13)-0.035(-0.20)

-0.076(-0.43)

-0.048(-0.27)

IND3 0.004(0.03)

0.021(0.12)

-0.007(-0.04)

0.002(0.01)

IND4 -0.018(-0.11)

-0.026(-0.16)

-0.052(-0.31)

-0.025(-0.15)

IND5 -0.018

(-0.10)

-0.017

(-0.1)

-0.047

(-0.27)

-0.028

(-0.16)IND6 -0.001

(0.00)

0.011

(0.06)

-0.008

(-0.04)

-0.001

(0.00)IND7 0.044

(0.27)

0.038

(0.24)

0.008

(0.05)

0.04

(0.24)IND8IND9 -0.045

(-0.25)

-0.053

(-0.29)

-0.084

(-0.46)

-0.059

(-0.32)IND10 -0.044

(-0.25)-0.037(-0.22)

-0.079(-0.45)

-0.048(-0.27)

SME -0.109(-2.59)**

ExPoRTER 0.069(1.62)

oREIgN 0.037

(0.68)Cnstant -0.022

(-0.09)

0.051

(0.22)

-0.003

(-0.01)

-0.015

(-0.07)N. bseratins 393 393 393 393-statistic 0.57 1.13 0.75 0.56Adjsted R2 0.0112 0.004 0.0069 0.0126



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appenDix table 1.3RegRessionsonthe iMpactof MiniMuM Wageonthe eMployMentof ManageMent WoRkeRs


MINWAgE -0.009(-0.85)

-0.012(-1.07)

-0.011(-1.06)

-0.009(-0.84)

IND1 -0.075

(-0.45)

-0.05

(-0.30)

-0.102

(-0.61)

-0.075

(-0.45)IND2 -0.087

(-0.49)-0.088(-0.50)

-0.142(-0.78)

-0.086(-0.47)

IND3 -0.227(-1.38)

-0.198(-1.20)

-0.234(-1.43)

-0.227(-1.38)

IND4 -0.221(-1.36)

-0.207(-1.27)

-0.251(-1.54)

-0.221(-1.36)

IND5 -0.103

(-0.60)

-0.094

(-0.54)

-0.133

(-0.76)

-0.103

(-0.59)IND6 -0.219

(-1.16)

-0.192

(-1.01)

-0.228

(-1.21)

-0.219

(-1.16)IND7 -0.138

(-0.85)

-0.125

(-0.77)

-0.17

(-1.04)

-0.138

(-0.85)IND8IND9 -0.31

(-1.73)*

-0.287

(-1.60)

-0.341

(-1.89)*

-0.309

(-1.71)*IND10 -0.187

(-1.08)-0.166(-0.95)

-0.221(-1.26)

-0.187(-1.08)

SME -0.08(-1.92)*

ExPoRTER 0.075(1.74)*

oREIgN -0.001

(-0.01)Cnstant 0.392

(1.62)

0.45

(1.84)*

0.418

(1.72)*

0.392

(1.61)N. bseratins 606 606 606 606-statistic 1.22 1.45 1.39 1.11Adjsted R2 0.0036 0.008 0.007 0.002



appenDix



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appenDix table 1.4RegRessionsonthe iMpactof MiniMuM Wageonthe eMployMentof all skilleD WoRkeRs


MINWAg -0.019(-0.62)

-0.019(-0.63)

-0.012(-0.40)

-0.013(-0.42)

IND1 -0.25

(-0.74)

-0.239

(-0.70)

-0.161

(-0.48)

-0.15

(-0.45)IND2 -0.623

(-1.69)*-0.629

(-1.70)*-0.429(-1.15)

-0.315(-0.84)

IND3 -0.083(-0.25)

-0.068(-0.21)

-0.069(-0.21)

-0.059(-0.18)

IND4 -0.543(-1.67)*

-0.537(-1.65)*

-0.444(-1.36)

-0.474(-1.47)

IND5 -0.485

(-1.36)

-0.484

(-1.36)

-0.388

(-1.09)

-0.322

(-0.90)IND6 -0.189

(-0.49)

-0.176

(-0.45)

-0.175

(-0.45)

-0.175

(-0.45)IND7 -0.421

(-1.29)

-0.417

(-1.28)

-0.32

(-0.98)

-0.369

(-1.14)IND8IND9 -0.188

(-0.51)

-0.182

(-0.49)

-0.083

(-0.22)

-0.037

(-0.10)IND10 -0.126

(-0.36)-0.121(-0.34)

-0.002(0.00)

-0.094(-0.27)

SME -0.047(-0.50)

ExPoRTER -0.268(-2.75)**

oREIgN -0.487

(-3.56)***Cnstant 0.376

(0.64)

0.396

(0.68)

0.321

(0.55)

0.276

(0.48)N. bseratins 676 676 676 676-statistic 1.70* 1.57 2.25** 2.73**Adjsted R2 0.01 0.009 0.02 0.027



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APPENDIx tRAININg REgREssIoNs

appenDix table 2.1

RegRessionsonthe iMpactof MiniMuM Wagesonthe nuMbeRof peRson-Weeksof in-house tRainingfoR skilleD pRoDuction WoRkeRs


MINWAgE -0.23(-1.69)*

-0.213(-1.62)

-0.226(-1.66)*

-0.227(-1.65)*

SME -1.247(-2.24)**

ExPoRTINg 0.451

(0.90)oREIgN 0.11

(0.19)

Cnstant 5.514(2.07)**

3.99(1.49)

5.004(1.84)*

5.471(2.03)**

N. bseratins 71 71 71 71

-statistic 0.72 1.19 0.73 0.64

Adjsted R2 0.0372 0.0266 0.0405 0.0539


appenDix



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appenDix table 2.2RegRessionsonthe iMpactof MiniMuM Wageonthe nuMbeRof peRson-Weeks

of in-house tRainingfoR pRofessional WoRkeRs


MINWAgE -0.234(-2.00)**

-0.237(-2.04)**

-0.232(-1.95)**

-0.234(-1.97)**

SME -0.836(-1.25)

ExPoRTINg -0.118(-0.18)

oREIgN 0.045

(0.07)Cnstant 5.348

(2.98)**

4.544

(2.40)**

5.443

(2.87)**

5.322

(2.87)**N. bseratins 46 46 46 46-statistic 1.06 1.13 0.93 0.93Adjsted R2 0.0125 0.028 0.0148 0.0156




of in-house tRainingfoR ManageMent WoRkeRs


MINWAgE -0.274(-3.55)***

-0.276(-3.55)***

-0.279(-3.63)***

-0.275(-3.52)***

SME -0.284

(-0.55)ExPoRTINg 0.566

(1.18)oREIgN -0.141

(-0.28)Cnstant 5.458

(3.71)***5.21

(3.36)***4.972

(3.27)***5.479

(3.67)***N. bseratins 46 46 46 46-statistic 2.59** 2.32** 2.50** 2.28**Adjsted R2 0.2418 0.2269 0.2502 0.2219


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of in-house tRainingfoR all skilleD WoRkeRs


MINWAgE -0.151(-1.29)

-0.151(-1.36)

-0.147(-1.27)

-0.148(-1.25)

SME -1.459(-3.15)***

ExPoRTINg 0.729

(1.65)*oREIgN 0.305

(0.56)Cnstant 4.651

(1.95)*4.646

(2.07)**3.851(1.60)

4.599(1.92)*

N. bseratins 81 81 81 81

-statistic 0.56 1.56 0.79 0.53Adjsted R2 -0.053 0.065 -0.028 -0.063


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