Could the minimum wage policy reduce food insecurity among households of formal workers in Indonesia?

Abstract

Background: Previous studies have concluded that minimum wages increase workers' wages. However, whether this effect will continue to improve households' food insecurity is an interesting question, especially in Indonesia, where food insecurity is still a public policy challenge. This study explores the ongoing impact of minimum wages on household food insecurity in Indonesia, leveraging data from the National Socioeconomic Survey (2017–2019) and provincial-level variations in minimum wages. The study employs unconditional quantile regression to provide nuanced insights by analyzing three food insecurity indicators: per capita calorie intake, per capita consumption of vegetables and fruits, and food diversity. We also investigate potential mechanisms driving the link between the minimum wage and food insecurity. Results: The study revealed that the real minimum wage reduced food insecurity, especially at specific distribution points. Significantly, the effect on per capita calorie intake was observed in lower deciles. The impact on dietary diversity was observed up to the seventh decile. However, the minimum wage increase did not significantly improve the consumption of nutritious foods like fruits and vegetables, except for the top deciles. The study confirmed that the minimum wage's impact on food insecurity operated through wage increases, particularly in the bottom-to-median wage distribution within the manufacturing sector. Conclusions: The study concluded that the minimum wage policy ameliorated household food insecurity indicators in specific distribution segments. Our results support the effectiveness of government policies in increasing the minimum wage as a viable approach to mitigating food insecurity among formal worker households, especially within the manufacturing sector. However, additional policies targeting the lower end of the per capita calorie intake distribution are necessary, as the minimum wage was recognized to have no impact on this group.