Have you ever wondered why hourly wages in DKI Jakarta can reach IDR 42,354, while in West Nusa Tenggara they only amount to IDR 12,933? This gap is not merely about numbers it reflects deep economic inequality across Indonesia’s provinces. A recent study from Airlangga University reveals that wage differences are not only determined by local conditions but also by what happens in neighboring regions. This means that to understand why our salaries are low or high, we need to look at a broader picture even as far as the province next door.
Researchers used 2023 data from Statistics Indonesia (BPS) covering all 34 provinces to analyze what factors influence hourly wages. They compared two statistical approaches: a standard regression model and a spatial model that accounts for interregional influences. The results were striking the spatial model proved 81.08% accurate in explaining wage variations, far outperforming the standard model at only 74.46%. This confirms that interprovincial relationships play a crucial role in determining how much workers earn
The most fascinating finding involves education. The study shows that years of schooling within a province does not always significantly affect wages in that province. However, schooling years in neighboring provinces have a substantial positive impact. This means that improving education quality in East Java, for instance, could potentially boost wages in Bali or surrounding provinces. This phenomenon is linked to labor mobility workers with higher education tend to move to areas with better pay, creating healthy regional competition that benefits everyone.
Beyond education, two other factors proved significant: the Poverty Gap Index and GRDP per capita. When poverty decreases or the local economy grows, hourly wages tend to rise. Interestingly, the influence of neighboring provinces’ GRDP per capita was not significant. This suggests that economic growth primarily affects wages within the region itself rather than spilling over to other areas.
The most fascinating finding involves education. The study shows that years of schooling within a province does not always significantly affect wages in that province. However, schooling years in neighboring provinces have a substantial positive impact. This means that improving education quality in East Java, for instance, could potentially boost wages in Bali or surrounding provinces. This phenomenon is linked to labor mobility workers with higher education tend to move to areas with better pay, creating healthy regional competition that benefits everyone.
Beyond education, two other factors proved significant: the Poverty Gap Index and GRDP per capita. When poverty decreases or the local economy grows, hourly wages tend to rise. Interestingly, the influence of neighboring provinces’ GRDP per capita was not significant. This suggests that economic growth primarily affects wages within the region itself rather than spilling over to other areas.
Author: Suliyanto
Link: https://journal.ummat.ac.id/index.php/jtam/article/view/35666
