Dampak Upah Terhadap Produktivitas Dan Inflasi: Studi Sektoral Dan Regional

In this paper we observe three key issues. First, we measure the effectiveness of regional minimum wage in affecting actual wage determination, productivity, and inflation level in Indonesia. Furthermore, we expand our analysis on significant factors affecting wage determination, productivity, and inflation level as our second objective. Finally, we identify the existence of a threshold level of minimum wage in relation to inflation level. For the abovementioned purposes, we apply spatial lag model (SAR) and spatial error model (SEM) to address the first and the second issue to provincial level data of Indonesia during of 2000-2006. Hence, following Hansen (1999) and Caner and Hansen (2004), we apply dynamic panel threshold model to extract the threshold level, given endogeneity issue. Correspondingly, it is evident that there is a nonlinear relationship between wage and inflation in Indonesia and we suggest that any minimum wage increase above 12.7 % will significantly accelerate inflation rate and under which an insignificant relationship exist. Furthermore, we show that actual wage determination in manufacturing and trade sector rely mainly on minimum wage, inflation, and GDP growth while the increase of workers’ productivity is a product of education and training. Therefore, we suggest that an integrated social policy is a key to boost workers’ welfare.