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Labor Market Transitions of Men and Women During an Economic Crisis: Evidence from Indonesia

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Indonesia is in the midst of a major financial, economic and political crisis. The immediate effects of the crisis on labor market outcomes are examined drawing on two rounds of the Indonesia Family Life Survey IFLS a longitudinal household survey collected in 1997 and 1998. Dire predictions made in early 1998 of rampant unemployment were, simply put, wrong. Employment remained remarkably stable. The drama of the crisis is reflected in the collapse of real hourly earnings which declined by around 40 during the first year of the crisis. However, stability in aggregate employment masks considerable churning in the labor market and a substantial change in the structure of employment in Indonesia. While many males left the labor force, about the same number entered the labor force many female workers exited the work but even more entered, often working in their own or the family business. Among those who remained employed, there was also a good deal of shifting between sectors of the economy. Some of that turnover reflects shifts in the relative attractiveness of different sectors. Specifically, there was a substantial tilt in favor of self-employment, particularly among those at the top of the income distribution and also among farmer households. The picture that emerges is one of a remarkably flexible labor market, tremendous resilience of families in the face of a devastating crisis and of women playing a key role in supporting family income that would otherwise be drastically diminished because of huge cuts in real hourly earnings.

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  • Economics and Cost Analysis

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