Agricultural wage growth and rural labour market adjustment: the case of Java 1970-1988

Examines agricultural wage changes in the context of rural labour market and macroeconomic change in Java over the past 20 yr. Java is of particular interest partly because of the unusual way in which first rapid economic growth and later recession affected rural wages in a labour market which up to quite recently has always been regarded as a classic case of "surplus labour'. Specifically the paper contrasts economic performance and policies and their impact on the labour market in the oil and post oil boom periods. We demonstrate how agricultural wage rates have been influenced by changing patterns of both labour supply and labour demand as well as by a differentiated rural economy. We begin with a brief review of changing macroeconomic performance, agricultural growth and government policies and their impact on the rural economy in Java over the past 20 yr. The following section examines real wage changes in the rice sector in detail since 1976, fitting a time trend to the data and suggesting some general explanations for quite marked changes in real wage rate trends. These real wage changes are then discussed in the context of rural economic change in which we hypothesis several clearly defined phases of change in rural labour markets since 1965. We also examine the changing role which a range of labour supply and labour demand factors have had in determining wage rate change during these periods of differing macro-economic growth rates and public policy emphasis. -from Authors