Since persistent earnings inequality occurred at the same time as the widespread adoption of computers, many have argued that the diffusion of computers is the driving force behind increasing inequality. Many studies show that computer users earn more than non-users, which is interpreted as technological change favouring educated workers. Nevertheless, there is controversy as to whether observed pay differentials between computer users and non-users really reflect increased worker productivity due to computers. Part of the debate is the presence of unobserved heterogeneity biasing the ‘computer premium’ upwards. This paper provides new evidence on the computer premium, while addressing prominent issues in the literature. Using two waves of the Indonesia Family Life Survey I find evidence of an earnings differential from computer use of between 9.6 per cent and 11.1 per cent. I also find that women, educated workers and those who move from informal to formal sector receive substantial computer premiums.