Analysis of Reservation Wages in the Province of the Bangka Belitung Islands in 2017

Abstract

Wages are an important component in the balance of the labor market. The reservation wage is used to find out the behavior of the workforce in looking for work. The reservation wage implies that a person will not work if the wage offer on the market is lower than the wage he has. The reservation wage explains the high unemployment rate in the highly educated workforce. With the estimation of reservation wages, it is hoped that the government can produce policies so that the unemployment rate can be reduced to its natural level. This study estimates the value of reservation wages for the entire workforce in Bangka Belitung Islands Province in 2017 using the Heckman’s Maximum Likelihood Estimation (MLE) method. The results show that the maximum reservation wage is owned by a highly educated workforce, is male, is married, and lives in urban areas while the minimum reservation wage value is owned by a labor force that is not / has not yet graduated from school, is female, is not married and live in the countryside.