Job Status and Productivity Imparity: Lessons Learned from the Indonesian Workers

Document Type : Research Paper

Authors

1 Department of Economics, Faculty of Economics and Business, University of Indonesia, Depok, Indonesia.

2 Department of Finance and Banking Administration, Vocational Education Program, University of Indonesia, Depok, Indonesia.

Abstract

This study analyzes the effect of workers' transition from contract to permanent employment status on work productivity. Contract employment is a non-standard employment relationship that is prevalent in many countries, including Indonesia. Contract workers generally have weaker work protection guarantees and lower wages than permanent workers. Consequently, most contract workers are motivated to perform at their best to be appointed as permanent workers. The Indonesia Family Life Survey (IFLS) waves 4 and 5 provide data on employment status transitions, which can serve as a proxy for changes in productivity. The unit of analysis in this study is workers aged 22-64 years in IFLS 5 who were permanent employees at that time. The standard Tobit regression results indicate that the transition from contract to permanent status was negatively associated with the productivity of permanent workers in 2014. The effect of changing employment status becomes smaller after being controlled by individual and job characteristics variables. We find evidence that the controlled variables—education, health status, stress level, job satisfaction, wage, and business sector—are significantly associated with workers' productivity in Indonesia. Good health conditions can reduce the likelihood that workers will not attend work. The empirical findings in this study indicate that the most important thing for workers is not their employment status but the company's sustainability and financial security for the workers themselves in the long term.

Keywords

Main Subjects

References

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Iranian Economic Review
Volume 30, Issue 1
March 2026
Pages 54-83

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