Impact of Trading International and Competition Industry to Wage Gaps in Industry Manufacturing in Indonesia

Abstract

This research analyzes the impact of international trade and industrial competition on the wage gap between skilled and unskilled workers in Indonesia's manufacturing industry. The study uses firm-level panel data, specifically the Large and Medium Industry Statistics (IBS) from BPS and provincial minimum wage data from the Ministry of Manpower and Transmigration. Model modifications are made for different industrial groupings, namely general manufacturing, labor-intensive manufacturing, and capital-intensive manufacturing. The empirical analysis presented in this research shows that an increase in international trade contributes to a reduction in the wage gap between skilled and unskilled workers in Indonesia's manufacturing industry. However, increased industrial competition has the opposite effect. Additionally, this research conducts a comparative analysis of the impact of international trade and industrial competition on labor-intensive and capital-intensive industries.