This paper focuses on labour market adjustment during the economic crisis of 1997–98. It shows how labour processes help explain better outcomes for the poor than were initially predicted. The Indonesian experience is viewed in a framework that contrasts two extreme models: a Keynesian world of rigid real wages, and a neoclassical situation of flexible adjustment to economic shocks. It was found that the Indonesian case is more consistent with the neoclassical than the Keynesian model, despite the tendency for greater government intervention in labour markets before the crisis. The paper also finds that the large change in relative prices from the exchange rate depreciation had a smaller effect than expected on employment structure. These conclusions are discussed in the context of major changes in labour markets prior to the economic crisis.

This study focuses on the efficiency of minimum wage policy for poverty reduction, taking Indonesia as a case study. A simulation approach assesses who benefits and who pays for minimum wage increases. On the benefits side, the rise in minimum wages boosts incomes in households with low wage workers. However, increases in wage costs are passed on through higher consumer prices. As a result, three out of four poor households lose in net terms, even when we assume no job losses. The findings suggest that minimum wages are unlikely to be an effective antipoverty instrument, at least for Indonesia.

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Increased international labour migration was one important dimension of structural change and globalisation in East Asia from the mid 1980s. Large international movements of mainly unskilled contract labour occurred in response to widening wage gaps between more and less developed countries in the region as the former experienced rapid structural change. Labour importing countries increasingly relied on unskilled migrant workers in less preferred jobs, in both export-oriented and non-tradable goods industries. The Asian economic crisis dramatically influenced the context in which international labour mobility had occurred in the pre-crisis period. Important issues included a possible reversal in role of international migration in structural change, both among unskilled contract workers and more skilled migrants, and replacement of migrants by unemployed local workers. The paper argues that the Asian economic crisis did not reverse the fundamental trend toward greater reliance on unskilled migrant workers in agriculture, manufacturing and service industries. Business and professional migration remained significant and even rose in some countries during the crisis. However, several countries were forced to develop a more coherent policy towards migrant workers, in light of the social impact of the crisis. Copyright Blackwell Publishers Ltd 2002.

This paper reviews Indonesia's Manpower Law 13/2003 and related regulations, against a backdrop of slow employment growth, business concerns about the legislation and government attempts to change it in 2006. The paper focuses on severance rates and dismissals, short-term contracts and out-sourcing, and minimum wages, also briefly discussing other articles, and comparing the law with those in neighbouring countries. It suggests that certain articles have contributed to significantly higher wage costs and reduced flexibility in the management of labour in Indonesia's formal sector, even though compliance is by no means universal within the private sector. Key provisions, especially large increases in severance rates, and needs criteria imposed for the purpose of setting minimum wages, are also out of step with labour market policies in other developing countries. Circumstantial evidence suggests that these measures have adversely affected the investment climate and damaged prospects for a recovery in employment.