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The adoption of digital technology and labor demand in the Indonesian banking sector

Author

Listed:
  • Armida Salsiah Alisjahbana
  • Maman Setiawan
  • Nury Effendi
  • Teguh Santoso
  • Baruna Hadibrata

Abstract

Purpose - This study investigates the effect of digital technology adoption on labor demand in the Indonesian banking sector. Design/methodology/approach - This research uses bank-level survey data obtained from the Indonesia Financial Service Authority (OJK) for the period 2010–2017 using semiannual data. This research applies a panel data method using a fixed effect model. Findings - This study results show that technology adoption affects labor demand significantly in all Commercial Bank Based on Business Activities (BUKU) levels of banks. Technology adoption tends to be a substitute for labor in BUKU I, BUKU II and BUKU III banks in the support and business units. In addition, technology adoption complements labor only in the business unit in BUKU IV banks. Research limitations/implications - This research uses a sample of only 40 banks at the regulatory levels of BUKU I, BUKU II, BUKU III and BUKU IV. These 40 banks account for more than 80% of the assets in the Indonesian banking sector. Originality/value - Literature investigating the effect of the adoption of digital technology on labor demand in the banking sector is still rare in the Indonesian economy. Most of the previous research limited its area of study to the manufacturing industry. This research makes a vital contribution in measuring the adoption of digital technology and its effect on labor demand in the banking sector using the BUKU level classifications of banks.

Suggested Citation

  • Armida Salsiah Alisjahbana & Maman Setiawan & Nury Effendi & Teguh Santoso & Baruna Hadibrata, 2020. "The adoption of digital technology and labor demand in the Indonesian banking sector," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 47(9), pages 1109-1122, August.
    • Handle: RePEc:eme:ijsepp:ijse-05-2019-0292
    DOI: 10.1108/IJSE-05-2019-0292
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    Citations

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    Cited by:

    1. Militcyano Samuel Sapulette & Pyan A. Muchtar, 2023. "Redefining Indonesia's Digital Economy," Working Papers PB-2022-06, Economic Research Institute for ASEAN and East Asia (ERIA).

    More about this item

    Keywords

    Technology adoption; Indonesian banking sector; Labor demand; Digital technology; A10; G20; O14;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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