Wages, Employment, Productivity in the Manufacturing Sector
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This chapter examines the dynamics of wage inequality and productivity in the manufacturing sector, arguably the most dynamic sector in the economy. The manufacturing sector maintains its role as the largest contributor to the overall gross domestic product (GDP) and is the main engine of growth. However, in addition to experiencing a disjoint between productivity and earnings growth in the manufacturing sector, the Indonesian economy seems to have experienced negative de-industrialisation since the Asian financial crisis in the sense that its share in GDP has fallen prematurely. This has been a result of slower growth of manufacturing value added (MVA) compared to GDP. Furthermore, growth has been “jobless” as employment growth lagged behind albeit slower growth of both MVA and GDP. Despite these trends, this chapter still views the manufacturing sector as the mainstay for creating quality employment and, hence following other observers, advocates for its revitalisation.
KeywordsManufacturing Sector Manufacturing Value Added Indonesian Economy Wage-productivity Gap Reindustrialization
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