This chapter provides a regional perspective on the broad trends in employment, wages and productivity. It begins with a brief discussion of the context and an overview of spatial inequalities in Indonesia. It also contains results of an empirical exercise relating formal employment, real wage, productivity and human development at the regional level. It finds rising inequality in all Indonesian provinces; however, the rates of increased inequality vary considerably. The decomposition analysis shows that within-province inequality is driving the overall increase in inequality in Indonesia, whereas there has been some reduction in between-province inequality. Furthermore, there are negative associations: (1) between increase in inequality and provinces’ initial conditions, such as the shares of manufacturing and mining in 2000 and mean years of schooling in 2002, and (2) between wage-productivity ratios and Gini indices across provinces. These findings have clear policy implications. For example, improving educational attainment and productivity-led re-industrialisation that creates decent jobs can contribute to reductions in inequality. The chapter also provides a snapshot of regional diversity of Indonesia’s manufacturing sector, highlighting the importance of regional dimensions in policymaking related to employment creation, inequality reduction and re-industrialisation in such a large and diverse country.
Formal Employment Indonesian Province Spatial Inequalities Inter-provincial Variation Vulnerable Employment
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