![]() Recent empirical evidence suggests that increases in the minimum wage may have hurt employment growth, particularly among small firms. But if they reduce labor mobility, labor market policies can be counterproductive to Indonesia's poverty reduction efforts. At the same time, labor market policy can play an important role in the Government's poverty reduction efforts by helping to facilitate labor mobility across sectors. ![]() Because poverty remains largely an agricultural and self-employed phenomenon, the most direct way to reduce poverty is to focus on improving the operation of product, land, and capital markets. ![]() Wage labor markets can be expected to play an increasingly important impact on the welfare of Indonesia's poor as the economy continues to undergo structural change, and as the workforce moves out of agriculture into manufacturing and services. Data show that the role of the labor market in reducing poverty has increased since the mid-1980s. Moreover, the largest single contribution to poverty reduction between 19 came from within-sector welfare gains to self-employed farm households. A majority of the poor in Indonesia come from agricultural and self-employed households.
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