The Consequences of Digitalization of the Labor Market in Developing Countries: Case Study in Indonesia

Abstract

Digitalization has positive and negative impacts on labor productivity and labor market. Nonetheless, digitalization era created fear on the labor market in developing countries, especially in Indonesia, which has a bonus demographic. This problem raised this study aims to identify the impact of digitalization on the labor market and labor productivity in Indonesia and understanding the readiness of Indonesia in the digital era. By using panel data from Statistics Indonesia 2012-2017 and research method is panel regression analysis. The results indicate that digitalization era can replace labor in Indonesia despite having a profound influence. Whereas digitalization has a higher effect on reducing labor productivity in Indonesia. As a result, to prevent the big wave of a new era of technology, the Indonesia government should renew the education system as a consequence of digitalization era and the changing of labor structure.