How Many People Is a Wage
Chapter 01·the premise
What was asked
- 01If a minimum wage is priced in months of one person's survival, how many people does one actually buy?
- 02Does the wage a province sets respond to what living in that province costs?
- 03Is there a way to check that does not require anybody to draw a poverty line at all?
- 04Is the legal floor still a floor, or has it become the going rate?
What it found
A minimum wage is an answer to a question: what does it cost to live here? Divide it by the cost of one person and the answer arrives in a unit anybody can picture. In the median province one minimum wage holds 4.77 people above the poverty line — and across the panel the figure runs from 2.79 to 8.86. The same legal category, meaning very different things in different places, and the spread has not narrowed since 2015. Then the harder result. Regressed with province fixed effects, the wage tracks its province's own poverty line almost exactly (+1.146). Add year fixed effects and the relationship vanishes (−0.262, interval crossing zero). The apparent tracking was the national inflation trend the whole time. A wage set by a national formula cannot track a local cost, and this is that fact arriving as a coefficient. Before any of it: the file carries a national aggregate among its provinces, and one of its wage columns is scrambled. Both are shown rather than silently repaired.
A minimum wage is a number that claims to know what living costs. Put it next to the official price of staying alive and it starts answering in people.
Indonesia sets its minimum wage province by province, so there are 34 of them. It also publishes, province by province, the garis kemiskinan — the monthly rupiah below which one person counts as poor. Both are monthly. Both are in rupiah. One is per worker and one is per person, so dividing the first by the second gives a count of human beings: how many people one legal minimum wage can hold above the official floor.
In 2022 the median province came to . The best-off province managed 7.92. The worst managed 3.53. Across all 238 province-years in the clean panel, sit below five people and 8% below four.
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