Minimum Wage and Women’s Decision-Making Power within Households: Evidence from Indonesia

Abstract

We estimate the effects of the minimum wage on women's intrahousehold bargaining power in Indonesia. Using regional minimum wages in Indonesia from 2000 to 2014 and a sample of married household heads and their spouses from a panel of Indonesian households, we implement a method that exploits differences in real minimum wage changes between geographically proximate districts. We exploit survey responses regarding participation in household decisions as a proxy for bargaining power. The minimum wage has a negative and statistically and economically significant effect on married women's bargaining power. We provide evidence that this negative effect is due to a relative improvement in labor market opportunities for married men compared with their wives in response to a minimum wage increase. The negative effect of the minimum wage on women's bargaining power is stronger among less-educated women who rarely work in the formal sector. We also find that the minimum wage increases household expenditure on tobacco and alcohol, reduces their contributions to a common form of microfinance, and has a negative effect on children's health, consistent with a loss of women's bargaining power. These effects are driven primarily by less-educated women. Our main results are robust to various specification choices.