Upping the minima: Brazil and Indonesia reviewed -January 2012

In what respects do workers earning (less than) the minimum wage differ from those above the minimum wages? And which characteristics influence the probability of being paid above the minimum wage? These questions have been analyzed using the Wage Indicator data collected for 14 countries participating in its research program. Given the size of populations, impact on the world economy, as well as the size of the data-sets gathered, the following analysis focuses on Brazil and Indonesia only.

The bread and butter question is: do the workers earning (less than) the minimum wage differ from those earning more?

Working women and the young

First of all, looking at personal characteristics, in both Brazil and Indonesia women and young workers are more likely to earn (less than) the minimum wage as compared to men. These results confirm results from many other countries that a statutory minimum wage or an increased minimum wage will work out most positively for (young) women, most likely reducing poverty and the gender pay gap.

Education and skills

Regarding education, in Brazil a high education increases the chances of earning above the minimum wage, but in Indonesia no effect is found. Skill level increases the chances of earning above the minimum wage in both Brazil and Indonesia.

Working hours and overtime

In Brazil working on Saturdays and Sundays is usually paid worse. It decreases the chances of earning above the minimum wage level. No such ‘weekend’ effect is found in Indonesia. Working in the evening has no noticeable effect on the chance of earning (less than) the minimum wage. Working in shifts or irregular hours however decrease substantially the chances of earning more than the minimum wage in Indonesia, whereas no such effect is found in Brazil. In both countries the duration of the working day is a major indicator: shorter working hours seem to go well together with earnings above the minimum wage.

(Self)employed

Own account workers in Brazil as a rule do not earn above the minimum wage leve. In Indonesia no significant effect is found. Those workers contributing to social security are more likely to be paid above the minimum wage in both countries. Having two or more jobs seems to be the way up the wage scale in Indonesia, but not in Brazil.

Working in a firm or organization with more than ten employees has no noticeable effect on being paid above the minimum wage in either Brazil or Indonesia. The same holds true for the type of contract.
Having a permanent employment contract does not influence the chance of being paid (less than) the minimum wage. Having a supervisory position likewise does not effect this chance. Yet, being covered by a collective bargaining agreement increases the chances of being paid above the minimum wage in Brazil, whereas no such effect is measurable in Indonesia.

Cash or not

Receiving the wage cash in hand does not relate to being paid (less than) the minimum wage in Brazil, but it decreases substantially the chances of being paid above the minimum wage in Indonesia. The same holds true for wage levels varying across the months. This has a downgrading effect in Indonesia, but not in Brazil. Finally, having received a pay increase in the previous year increases chances of being paid above the minimum wage in Brazil, whereas it has no effect in Indonesia.

 


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