The Role of Household Income on Child Labor: A Lesson From the Indonesian Crisis

Abstract

Child labor is often considered a logical consequence in a household trying to meet the economic needs of poverty-stricken families. Reallocating a child's time as a buffer stock in household life is one of the last strategies or mechanisms carried out in developing countries when faced with various shocks. The purpose of this study is to determine the role of household income on child labor in Indonesia. The model used in this study was conducted in two stages through the fixed effects and conditional fixed-effects model. The results showed that permanent income affects child labor in Indonesia. This shows that child labor cannot be separated due to many factors, which include differences in economic conditions that underlie household choices and income among economic actors, incomplete financial market conditions, and constraints from resource and credit that may limit the investment decision that an individual makes. Therefore, the household would conduct consumption smoothing through children involved in the workforce. One thing that should be noted is that in households, females are more prone and susceptible than males when faced with shock. Therefore, to reduce the effects of shock, females tend to become involved in the workforce, primarily in the fields of agriculture and domestic work.