Narrowing Asia's gap between rich and poor

Will raising minimum wages in Indonesia and China help or hurt the lowest paid?

China and Indonesia have agreed to increase minimum wages to help narrow the gap between rich and poor.

The countries' economies are among the fastest growing in the world, but they are also witnessing growing social unrest.

Millions remain in poverty and workers are increasingly taking to the streets, holding strikes and protests to press their demands for more money.

"I think the minimum wage will hurt the economies of Indonesia and China because markets should determine the wage floor of the workers. If you put a minimum wage rate in the economy it creates distortion, it creates inefficiency, and it creates deadweight loss for the economy .... Most of it is done by politicians and politicians don't understand economics, they don't understand finance, they are more interested in holding on to their power. It hurts the least skilled workers who get slaughtered when the minimum wage rate is applied because most of the corporations they don't accept that and markets don't accept that." - Shan Saeed, an economist and financial consultant

And it appears to be working. Salaries are being increased for the lowest paid workers. But the new minimum wage policy is likely to have a significant impact on the workforce in China and Indonesia.

Around 128 million people in China's rural areas have been defined as poor, earning an average of $368 a year.

China's government is proposing a minimum wage equivalent to 40 percent of average urban salaries. Based on a figure of $8,760 for Beijing, that would give a minimum wage of $3,504 a year - 10 times the average for China's rural poor.

In Indonesia, the governor of Jakarta has agreed to raise the minimum wage in the capital to $2,736 a year. That is an increase of 40 percent, and six times more than the global poverty level of $456 a year, as defined by the World Bank.