Equality of Pays and Wage Behaviours: Micro and Macro Perspectives of Indonesia Labour Market
by Deniey Adi Purwanto
Date of Examination:2019-11-12
Date of issue:2020-03-09
Advisor:Prof. Dr. Stephan Klasen
Referee:Prof. Dr. Sebastian Vollmer
Referee:Prof. Dr. Bernhard Brümmer
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Abstract
English
This dissertation analyses labour market imperfections from both microeconomic and macroeconomic perspectives, and incorporates empirical examinations of equality of pays and wage behaviours drawing on the Indonesian labour market experiences. In the first essay, an alternative breadwinner model in family division of labour is introduced to scrutinize the extent of gender wage gap, inequality of pay and marriage wage penalty. Departing from the view of the traditional family of labour, the study shows that women tend to take on double roles, simultaneously as breadwinner and caregiver. As women take on these roles, they earned a lower rate of wage. Despite the fact that the female marriage wage penalty died out, the gender wage gap and wage discrimination have persisted. While the role of regional minimum wage as the current institutional instrument is still trivial, other alternative policies and actions need to be exercised to promote gender equality of pay. The second essay examines another dimension of equality of pay. The age wage gap is argued as the new form of the income divided around the world. The intergenerational wage gap introduced in this study examines the extent of the wage gap between boomers, gen-Xers and millennials. Intersectional intergenerational wage gaps also exercised to take into account potential generating factor of wages premium. This study found that millennials struggle the most in term of the wage gap, while boomers were most likely disproportionately paid due to wage discrimination. Higher education attainment, specialization, travelling to work and urban residential were found to generate a certain degree of wage premium. Developing vocational education, entrepreneurship and creative industries will have a positive contribution in promoting equal pay especially for younger workers, while improving the pension system and access to retirement plans might help older workers to improve their bargaining power. Finally, the third essay examine the extent of wage inflexibility by considering heterogeneity and dependency across provincial labour markets, regimes and heterogeneous structural breaks. The findings indicate the existence of temporary effects of the unemployment rate on wage, heterogeneity of wage behaviour in the short run, interregional dependence in wage flexibility and differential behaviour of wages in the presence of regimes and structural breaks. These findings are in line with the Phillips curve, suggesting a temporary effect of unemployment rate to the change of wages. Some adjustments toward the long run equilibrium of wages do take place although the role of labour market supply might be more complicated than expected. The overall findings of these Indonesia’s experiences are expected to contribute toward the development of an efficient and flexible labour market. Collectively, all essays are substantially relevant to Indonesia as a developing country, and to global discussions of equality of pays and wage behaviours.
Keywords: gender wage gap; intergenerational wage gap; wage rigidities; interregional wage behaviour