Efficiency and Elasticity of Labor Use on Economic Sectors in Indonesia

Abstract

The research objectives are: (1) to analyze the level of efficiency and elasticity of the use of labor in Gross Domestic Product (GDP) based on economic sectors in Indonesia in the period of 2010-2016, (2) to find out the changes/ transformations in the use of labor among the economic sectors in Indonesia in the period of 2010-2016. The analytical method used is a descriptive and analytical method of the Cobb-Douglass production function. The results showed that during the period of 2010-2016 there had been a decrease in the efficiency of labor absorption in GDP at an average of 6.5% per year. The values of labor elasticity against GDP during the period 2010-2016 are inelastic (e <1) but it is still positive. This shows a tendency to decrease changes in employment absorption of GDP. There is still an incompatibility in the business field between the ability to contribute to GDP with the ability to absorb labor. When viewed from the contribution to GDP, the transformation from the agricultural sector to the industrial sector, the service sector field and other economic sectors have been successful, but when viewed from the absorption of labor, the transformation has failed.

Efficiency of labor allocation: An observation in Indonesian Standard Industrial Classification (ISIC)

“…Efficiency is the relationship between resource inputs (costs, such as labor, capital, or equipment) and outputs (results or outcomes) [5]. Nababan [6] states that efficiency is a parameter for measuring company performance in the production process. Coelli et al [7] identified three types of efficiency: technical efficiency, allocative efficiency, and overall efficiency.…”