Minimum Wage And Unemployment Essay

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2. definition

From the 1950s to 1960s, modern industrial sector emerged as economic development. In response to this, Arther Lewis proposed that rural sector such as agriculture would be replaced by modern sector in urban areas. Although Europe and Japan increased industrial sector and expand the economy, this economic change did not happen in developing countries. On the contrary, the rate of unemployment increased. In addition, global competition expanded by 1990s and the informal employment become worldwide arguments (Chen at el, 2005).

A generally accepted definition of informal work is proposed by ILO in 2002, that is, not recognised, registered, regulated or protected by the law, hence receive little or no legal or social protection.
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The minimum wage has a role of maintaining workers’ basic living standards. However, if the minimum wage rises, firms’ try to cut the cost of the labour force. Therefore, although it seems increasing minimum wage bring a positive influence on workers, it destroys jobs rather than protect workers. Minimum wage in Indonesia is very high compared to OECD countries. This affects the significant impact on labours. Rama (2001) studied the influence of minimum wage in Indonesia and revealed doubling minimum wage destroy between 0 and 5% of formal employments. Therefore, those who lost their job enter to the informal sector. In 2014, more than 70% of workers are in the Informal sector in …show more content…
Therefore, Chen (2005) insisted the importance of organising informal workers. Nowadays, informal workers are integrated into a global economy. The most serious issue for informal workers is that they do not possess the appropriate channel to demand and raise their voices despite international movement has grown. Organising the informal sector is important because individual workers in the informal sector have little or no bargaining power regarding wages and work conditions (Folkerth & Warnecke, 2012). As those individual workers lack the power of rising their voice, organising informal workers is crucial due to promoting collective bargaining and building international alliances. The goal of organising is improving workers quality of life by increasing wages, social protection which includes safety net, health insurance and pensions and these can reduce informal workers’ risks (Chen at el,

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