The Long Lasting Brunt of Indonesia’s Currency Depreciation: a historical analysis on Suharto’s reign and the decades-long condemnation of low-wage workers Open Access Deposited
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The 1997 Asian Financial Crisis had a significant impact on the Indonesian financial sector. Despite statistics showing an increase in low-wage workers’ employment, reduction in overall confidence resulted in bank runs, consequently weakening the Rupiah. Amidst currency depreciation and Suharto’s faulty economic policies, the Indonesian labor market proved unsustainable. When banks began to declare bankruptcy, industries with services that depended on banks also faced the difficulty of dismissing employees or lowering their wages. The labor market was restructured in a way that increased inter-sectoral mobility and widened income inequality. Reduction in real workers’ wages, heavy decrease in government budget and a weakening of export-dependent sectors were all factors that contributed to an increase in the number of people living on or below the poverty line. Indonesia’s continued ethnic divide and corrupt governance made market restructuring rigid and irreversible, further prolonging the crisis and widening the population of low-wage workers. Suharto’s policies that occurred on the backdrop of the crisis had dire consequences that exceeded his presidency.