ABSTRACT
The purpose of this study is to analyze the spatial effect of wage increases. Generally, wage increases in one region affect the rates in nearby places. In spatial econometrics, this shows that there is an altitudinal influence in increasing wage rates. In this study, a spatial regression model is used. The data used was obtained from the 2008-2010 Sakernas panel. The results showed that the spatial effect was significant, meaning it influences the wage increases of several provinces in Indonesia. This finding shows the need for caution when determining the value of wages. In case the increase affects wages in neighboring provinces without being accompanied by increased productivity, production processes may become inefficient, negate added value, reduce regional competitiveness, and in turn, reduce employment expansion.
