Good jobs and bad jobs for Indonesia's informal workers

Abstract

In contrast to the majority of studies that have treated informal workers as a single homogeneous group, this article accounts for the possibility of “winners” and “losers” among informal workers. Applying unconditional quantile regressions to data from the Indonesian Family Life Survey, the authors are able to estimate the formal–informal wage gaps for different segments of the earnings distribution. Although the evidence confirms the existence of a substantial earnings penalty for many informal workers, there is also a group who earn roughly similar incomes to formal workers. The findings are consistent with Fields's (1990 and 2005) model of heterogeneous informal employment.