The Relationship Between Labor Wage and the Labor Productivity of the Indonesian Textile and Garment Industry

Tiara Maharani () and Maman Setiawan ()
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Tiara Maharani: Master of Applied Economics, Padjadjaran University

No 201902, Working Papers in Economics and Development Studies (WoPEDS) from Department of Economics, Padjadjaran University

Abstract: The textile and garment industry is one of the leading industries in Indonesia. However, the industry has been facing a problem with the increase in labor wage, which has,in turn increased the cost of production and led to a decrease in competitiveness. Therefore, the competitiveness can be increased by increasing labor productivity. This paper investigated the correlation between labor productivity, labor wage, and other factors such as capital and firm ownership in the Indonesian textile and garment industry by employing a pooled regression methodology for the periods between 2001 and 2015. By utilizing the Indonesian Medium and Large Manufacturing Survey, particularly in the context of the spinning, weaving, and apparel subsectors, we found that in the all of subsectors, labor wage has a positive correlation and statistically significant with labor productivity. Furthermore, the estimated results indicated that labor productivity is affected by an increase in capital, especially in the Indonesian textile and garment industry. The result suggested that labor wage and capital boosting can be utilized to boost labor productivity. The result implies that foreign ownership should be more opened in the Indonesian textile and garment industry, especially in Apparel subsector.

Keywords: labor productivity; competitiveness (search for similar items in EconPapers)
JEL-codes: J3 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2019-11, Revised 2020-01
New Economics Papers: this item is included in nep-sea
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