Regional Minimum Wage Policy and Informal Sector Employment in Indonesia A Conceptual Review

Abstract

Purpose: This conceptual article explains the relationship between minimum wage policy and informal employment in the Indonesian context. Approach: It integrates theoretical arguments and prior studies through a structured narrative review. Conceptual synthesis: The framework identifies labor cost adjustment, enforcement differences, productivity, and firm formalization decisions as the principal explanatory channels. The relationships depend on regional productivity, industrial structure, compliance capacity, and worker mobility. Conclusion: The framework provides testable propositions for future empirical research. No primary survey, interview, experiment, or regression result is claimed.