Abstract
The study provides evidence on the transition and growth of the formal sector in the Indonesian economy. It utilizes data from the National Labour Force Survey (Sakernas) for tracking the previous work status of labourers as formal or informal workers. The study also examines the implications of formalization of employment for the different rates of earnings of formal sector workers, given their human capital characteristics and different industries of employment. The study finds that the growth of employment in the formal sector is mainly the result of the entry of younger and better educated workers. Although there is some mobility from the informal to the formal sector, the results show that individuals who were previously working in the informal sector are less likely to move to the formal sector. In terms of earnings, there is evidence of scarring effects: individuals who are initially in the formal sector earn more than individuals who are initially in the informal sector.
| Original language | English |
|---|---|
| Pages (from-to) | 1-20 |
| Number of pages | 20 |
| Journal | Journal of Southeast Asian Economies |
| Volume | 39 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Apr 2022 |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 8 Decent Work and Economic Growth
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SDG 9 Industry, Innovation, and Infrastructure
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SDG 10 Reduced Inequalities
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SDG 17 Partnerships for the Goals
Keywords
- earnings differentials
- human capital
- Indonesia
- Informal sector
- job mobility
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