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Remuneration Outcomes of Internal Migrants in Indonesia - A Quantile Regression Approach

  • Senadheerage Pamudi Banjitha Abeynayake ,NSBM Green University Town Pitipana, Homagama, Sri Lanka (pamudi.a@nsbm.lk)
Abstract

Internal migration is a common livelihood strategy undertaken by the poor within a nation in an attempt to improve their economic standing. However, many are argued to get trapped in the low paying informal sector employment. To date many studies have investigated whether migrants improve their income upon migration. In the Indonesian context, research suggests that internal migrants earn a higher wage than urban non-migrants. However, observing wages over time is insufficient to understand the complete situation of migrants in the labour market. The present study is an attempt to provide a better understanding about migrants’ economic assimilation by examining the total compensation package (monthly salary, value of in-kind benefits) across the distribution. For this purpose data on Indonesian internal migrants and non-migrants from the Rural-Urban Migration in Indonesia (RUMiI) Project from year 2008 and 2009 is used to gain insight into the fragmented nature of the urban labour market in the four Indonesian cities included in the dataset. Initial findings from Ordinary Least Square (OLS) regression analysis suggest that migrant’s (both rural-urban and urbanurban) receive better compensation packages in comparison to their urban non-migrant counterparts. Moreover, it appears that in Indonesia the extent of job informality is an important determinant of the value of the remuneration package received by workers, where both rural-urban and urban-urban migrants are penalized for working in informal sector employment. When moving beyond mean regression estimates, the Quantile Regression (QR) suggests that earnings premiums are visible mostly in the lower end of the earnings distribution. Further, the informality penalty is larger at the lower end of the remuneration distribution.

Keywords— internal migrants, informality, remuneration, quantile regression

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