One of the most important topics in development economics is education. Education, at a minimum having the capability to read and write, not only gives people skills that help them make a living but also opens opportunities for them to think and communicate and experience life more fully. Neoclassical development economists tend to emphasize the former in terms of investments in human capital and their positive effects on development through increased economic growth. Amartya Sen, while recognizing both, combined their effect on people as expanding their freedoms in his vernacular of "development as freedom" (1999). As the relevance of gender to understanding development and economics has become recognized, educational differences between the genders have been noted and the disparity in literacy and educational opportunities for females compared with males has become a public policy issue in developing countries.
One of the 2000 United Nations millennium goals is to achieve primary education for every child by 2015. Additionally, a goal to "promote gender equality and empower women" focuses on eliminating the gender disparity in primary and secondary education (UN 2000). These goals are designed to provide for future growth and prosperity in developing countries and to reduce gender inequality in the longer run. Because education for females often has the additional benefit of lowering fertility, special attention is paid to policies aimed toward educating girls. This emphasis on girls' education, however, overlooks much of the current working population of women who are beyond the traditional age for primary schooling. The most relevant type of education for women is likely to involve some kind of basic training in literacy. The ability to read and write is the most basic requirement for improving the labor market opportunities of women (Beneria 2003).
In this paper we explore the relationship between literacy and labor market outcomes for women in Indonesia. One way women may be helped is if literacy provides a means to a better job, specifically by tearing down one of the barriers to entry into certain occupations. Indonesia provides an excellent setting for this study for a few reasons. First, we have excellent data for Indonesia that include a distinction between educational attainment and literacy. Literacy and education are as one would expect positively correlated, and most studies look at the effects of educational attainment on women's labor market outcomes. In this study we are interested in focusing on the skill--literacy--irrespective of how it is acquired, and how it is related to occupational outcomes for women. Indonesia is also a good context for this study because women's paid labor force participation has been expanding rapidly and is categorized as one of the newly industrializing economies which has included a fairly explicit principle of shared growth "that makes efficient use of labor and [has] invested in the human capital of the poor" (World Bank 1990, 51).
We take a two-stepped approach and use chi-squared tests of independence to examine the relationships among gender, literacy, and occupation. First we look at whether occupation and literacy are associated with each other. As expected, the results show that literacy is positively correlated with employment in better jobs. Second, we look at occupational segregation b gender. The top occupations for women also tend to be the occupations least associated with literacy, and women make up a disproportionate share of the workforce in those occupations. The results suggest that illiterate women face two barriers to entry into good jobs--their inability to read and write and...