MANUFACTURING-LED GROWTH AND EMPLOYMENT TRANSFORMATION: EVIDENCE FROM GRESIK REGENCY, INDONESIA

Abstract

Industrialization does not necessarily translate into proportional employment expansion within the manufacturing sector. This study examines the structural transformation of Gresik Regency, East Java, Indonesia, by investigating the relationship between industrial specialization, labour-market transformation, human capital, and human development. The study employs a quantitative descriptive-explanatory regional case-study design using secondary data from Statistics Indonesia (Badan Pusat Statistik/BPS). The analysis combines indicators of regional economic structure, sectoral employment, labour-force participation, unemployment, employment formality, educational attainment, and the Human Development Index (HDI). The findings reveal a distinctive output–employment divergence. Manufacturing accounted for 51.25% of regional Gross Regional Domestic Product (GRDP) in 2024 but absorbed only 35.33% of employment, generating a 15.92-percentage-point output–employment gap. In contrast, services absorbed the largest share of employment at 52.47%. The labour market also exhibited a 68.00% labour-force participation rate, a 5.47% open unemployment rate, and a 56.16% formal-employment share. Meanwhile, the workforce remained concentrated at the senior-secondary education level, while tertiary-educated workers represented 13.60%. Despite these structural divergences, the HDI increased consistently from 76.98 in 2021 to 79.69 in 2025. The findings indicate that regional industrialization should not be evaluated solely through manufacturing output. Instead, structural transformation should be understood as a multidimensional process involving output specialization, employment reallocation, workforce capabilities, and human development. The study contributes to the literature by highlighting the distinction between output transformation and employment transformation in an emerging industrial region.