Uncovering of productivity and wages: An evidence from Indonesia

Abstract

Productivity plays an important role towards inclusive economic development in a country. Improvements in productivity, competitiveness, living standards, and economic development encourage policymakers to accelerate fair development. The premise of this study aims to investigate the factors that influence labor productivity in an emerging market, such as Indonesia. This work is supported by quantitative and verification methods. Panel data collection uses secondary publications throughout 2016-2023 compiled from reports from the government institution. Then, the data is processed and interpreted based on the Ordinary Least Square (OLS) and Generalized Least Squares (GLS) approach. The output of the study illustrates that the increasing wage inequality, average length of schooling, economic growth in the primary sector, economic growth in the secondary sector, and economic growth in the tertiary sector increase labor productivity in Indonesia. From this study, the four variables have proven their respective contributions which have a significant impact on stimulating labor productivity in the long term. In the context of broadening scientific horizons, strategies for future discussion directions consider aspects beyond wage inequality, average years of schooling, economic growth, and labor productivity. In the dimension of novelty, this paper also complements previous publications, where the highlighted case studies are district and city data in Indonesia.