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Earnings, productivity and inequality in Indonesia

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  • Mohammad Zulfan Tadjoeddin

Abstract

This article examines real wage-earning, productivity and earning inequality in Indonesia, focusing on differentials among provinces and economic sectors. The post-1997 Asian crisis and democratic Indonesia mimic the global trend of disconnection between wages and productivity: labour productivity continues to rise while real wage-earning stagnates or declines. This disconnection has three consequences. First, it affects income or earning distribution as confirmed by rising overall earnings inequality. Second, while it explains the conventional wisdom of an economy-wide negative relationship between real wages and employment, it is of concern that these two variables do not move in the same direction as the productivity improvements that have occurred in large and medium establishments in the manufacturing sector. Third, the disconnection between productivity and earnings growth opens a new discussion on the broader issue of quality of growth, as the data show that robust economic growth in the post-crisis Indonesia has not been accompanied by parallel improvements in the quality of employment.

Suggested Citation

  • Mohammad Zulfan Tadjoeddin, 2016. "Earnings, productivity and inequality in Indonesia," The Economic and Labour Relations Review, , vol. 27(2), pages 248-271, June.
    • Handle: RePEc:sae:ecolab:v:27:y:2016:i:2:p:248-271
    DOI: 10.1177/1035304616643452
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    References listed on IDEAS

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    Cited by:

    1. Nabil Rizky Ryandiansyah & Iwan Jaya Azis, 2018. "Structural Change, Productivity, and the Shift to Services: The Case of Indonesia," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 64, pages 97-110, Desember.
    2. Choi, Seonkyung & Li, Huihui & Ogawa, Keiichi, 2023. "Upper secondary vocational education and decent work in Indonesia: A gender comparison," International Journal of Educational Development, Elsevier, vol. 101(C).

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    More about this item

    Keywords

    Earnings inequality; economic growth; employment growth; employment quality; income distribution; Indonesia; productivity; wage dispersion;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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